The impact of inventory management on Vietnam’s industrial firm performance: A double-threshold regression approach

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Type of the article: Research Article

Abstract
This paper examines the influence of inventory management on firm performance, applying Hansen’s threshold estimation method across firm size. It uses panel data, including 149 industrial manufacturing firms listed on HOSE, HNX, and UPCOM markets in Vietnam from 2014 to 2024. In small firms (SIZE ≤ 24.4679), WIP (work in progress) and ITO (inventory turnover) positively affect ROA, while FIN (finished goods) has a negative effect. As SIZE increases (24.4679 < SIZE ≤ 25.0912), WIP reverses to a strong negative effect, FIN turns positive, and ITO loses statistical significance. In large firms (SIZE > 25.0912), RAW (raw materials) appears as a significant negative factor on ROA, WIP continues to have a negative effect but at a decreasing level, and FIN reverses to a negative effect. These findings suggest that SIZE is important in moderating the relationship between inventory and firm performance. The control variables also show significant effects: TANG (tangible assets) negatively affects firm performance, while CASH has a positive impact, confirming the role of working capital balance. Regarding managerial implications, SIZE is an important moderator in the relationship between inventory and firm performance. For small firms, exploiting the benefits of WIP and increasing inventory turnover can improve profitability. Meanwhile, maintaining a reasonable WIP level becomes urgent for medium and large firms to avoid wasting resources and delaying production. For the largest firms, more attention should be paid to RAW to limit the risk of capital congestion, while maintaining a suitable level of FIN to ensure a smooth supply chain.

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    • Figure 1. Research framework
    • Table 1. Variable description
    • Table 2. Descriptive statistics
    • Table 3. Correlation matrix
    • Table 4. Threshold estimates
    • Table 5. The threshold effect test
    • Table 6. Multiple threshold estimates
    • Table 7. Multiple threshold test statistics
    • Table 8. Threshold effects of inventory components on ROA
    • Table 9. Hypothesis testing
    • Conceptualization
      Hai Anh Vu Thi, Thi Thanh Hoang
    • Data curation
      Hai Anh Vu Thi
    • Formal Analysis
      Hai Anh Vu Thi
    • Investigation
      Hai Anh Vu Thi, Thi Thanh Hoang
    • Methodology
      Hai Anh Vu Thi
    • Project administration
      Hai Anh Vu Thi
    • Resources
      Hai Anh Vu Thi
    • Software
      Hai Anh Vu Thi
    • Supervision
      Hai Anh Vu Thi
    • Validation
      Hai Anh Vu Thi, Thi Thanh Hoang
    • Visualization
      Hai Anh Vu Thi
    • Writing – original draft
      Hai Anh Vu Thi, Thi Thanh Hoang
    • Writing – review & editing
      Hai Anh Vu Thi, Thi Thanh Hoang