The relationship between inventory investment and the real interest rate has been difficult to assess empirically. Recent work has proposed a linear-quadratic inventory model with time-varying discount factor to identify the effects of real interest rate on inventory investment. The authors show...

This paper examines the value effect of inventory investment on profitability for a large sample of UK SMEs over a ten-year period. Taking into account industry, firm and year effects, the results show that inventory investment is sensitive to SMEs access to finance. Inventory investment...

This paper uses a panel of UK manufacturing firms to examine whether the effect of cash flow on inventory investment reflects the presence of financially constrained firms. Financially constrained firms are identified using a number of criteria, including the criterion suggested by Bond and...