Inventory behaviour and an aggressive pricing strategy in the portuguese manufacturing industry

• Autor(a) principal: Sousa, Jorge Gustavo Pereira de
• Data de Publicação: 2018
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.14/25461
• topic: Financial distress; Internal liquidity source; Inventory behaviour; Aggressive pricing behaviour; Survival; Small and median enterprises; Manufacturing industry; Domínio/Área Científica::Ciências Sociais::Economia e Gestão

The present thesis analyses the relation between inventory levels and market price variations in the Portuguese manufacturing industry during the period from 2006 to 2016. During financial downturns, smaller firms rely on inventory as an internal source of funding. By reducing prices, firms hope to quickly sell stocks and obtain the necessary cash to face their financial obligations and avoid bankruptcy. To study this phenomenon is adopted a sector perspective, in which small and medium-sized firms are analysed separately. In both cases, the average inventory level is regressed on manufacturing market price variations. The model is tested for endogeneity, normal distribution, jointly significance and robustness; additionally, for consistency purposes, were computed distinct regression model verions. Results show that inventory has a negative effect on market prices, as expected by the economic theory. Moreover, according to estimation results, the negative impact of inventory seems to be greater in the case of medium-sized firms. Nevertheless, these estimation coefficients are not statistically significant. In a first instance, this phenomenon could be seen as an early warning sign for financial difficulties in the industry. Notwithstanding, all the assumptions and limitations regarding data availability, collection and computation contribute to a loss of results’ precision.