Inventory accumulation, location and financial structure: evidence from China

Purpose – The purpose of this paper is to empirically examine the relationship between firms' inventory accumulation and financial structure. It further investigates the impact of geographical locations on firms' inventory investment decision after controlling for firms' financial structure. Design/methodology/approach – This paper uses a large panel of over 1,400 Chinese listed firms that issued. Findings – Firms' financial structure, as reflected in the availability of internal and external capital, has significant impact on firms' inventory decisions. In addition, it is found that firms headquartered in major economic development areas (EDA) tend to have slower inventory growth than firms located in rural areas. Moreover, the results reveal that locating in major EDA facilitates firms' stockpiling of inventories through easy access to external capital. Originality/value – This study not only contributes to the studies on the interactions between firms' location and their financing and investment policy, but also improves our understanding about emerging markets such as China.