Title: Inventory holding and UK SMEs' performance

Authors: Godfred Adjapong Afrifa; Stephen Berchie

Addresses: Canterbury Christ Church University, North Holmes Road, Canterbury, CT1 1QU, UK ' KPMG Ghana, 117 YIyiwa Drive, Abelenkpe, Accra, Ghana

Abstract: This paper examines the relationship between inventory holding and firm performance for 141 small and medium-sized enterprises listed on the alternative investment market for an eight year period (2005 to 2012). Panel data regression analysis is used in the estimation of functions relating the inventory holding with measures of firm performance. The results provide empirical evidence which indicates the existence of an optimal inventory level that maximises performance. The results show that a concave relationship exists between inventory holding and performance. Furthermore, the paper determines whether or not deviations from the optimum inventory level reduce performance. The results indicate that deviations above or below the optimum inventory level decreases performance. Overall, the findings provide evidence that firms should strive to attain the optimal inventory level in order to maximise their performance.

Keywords: inventory holding; firm performance; small and medium enterprises; SMEs; UK.

DOI: 10.1504/IJBPM.2019.096460

International Journal of Business Performance Management, 2019 Vol.20 No.1, pp.16 - 33

Accepted: 04 Jan 2018
Published online: 04 Dec 2018 *

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