Abstract
This paper investigates the role of vertical integration in the inventory management of a supply chain. Taking Chinese listed companies from 2001 to 2010 as our sample, we find that vertically integrated firms have lower inventory holdings and volatility, indicating that vertical integration improves firms’ inventory management efficiency. Further analyses show that this effect is more pronounced for firms located in regions with a lower level of marketisation and for firms facing higher demand volatility and business growth. In addition, the more thoroughly firms have accomplished vertical integration, the more greatly vertical integration increases inventory management efficiency. Finally, we find that the positive impact of vertical integration on inventory management is more significant in industries with no overcapacity, for diversified firms, and during non-crisis periods.
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CLC Codes: F272, F230
* The authors acknowledge the financial support they received from the National Natural Science Foundation of China (71172143, 71102136, 71372038), the Project for Key Research Institutes of Humanities and Social Science in Universities of the Ministry of Education (12JJD790037), the Program for New Century Excellent Talents in University (NCET-13-0893), the Shanghai Philosophy and Social Science Foundation (2013BGL008), the Innovation Program of Shanghai Municipal Education Commission (14ZS078), and the Program for Innovative Research Team of Shanghai University of Finance and Economics. We are grateful to the referees and Professor Shimin Chen (the executive editor) for their helpful comments.
1 Jun Huang, Institute of Accounting and Finance, Shanghai University of Finance and Economics, 777 Guoding Road Shanghai (200433); email: huangjun@mail.shufe.edu.cn. Shuang Xue, Institute of Accounting and Finance, Shanghai University of Finance and Economics, 777 Guoding Road Shanghai (200433); email: xuesh@mail.shufe.edu.cn. Yun Hong, College of Business Administration, Hunan University, 11 North Lushan Road, Changsha (410082); email: hongyun1494@163.com.
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Huang, J., Xue, S. & Hong, Y. Vertical Integration and Inventory Management Efficiency *. China Account Financ Rev 16, 20 (2014). https://doi.org/10.7603/s40570-014-0020-4
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DOI: https://doi.org/10.7603/s40570-014-0020-4