Does lean inventory management alleviate financing constraints?

Jingbin Wang · Xinyan Yao · Xuechang Zhu · Baitong Li

17 citations0/0 files storedJournal of Manufacturing Technology Management

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Working Capital and Financial Performance Supply Chain and Inventory Management Quality and Supply Management

Abstract

Purpose This study explores the intricate relationship between inventory leanness, financial constraints and digital transformation in listed Chinese manufacturing firms. Design/methodology/approach Using a large panel data collected from 2,563 Chinese listed manufacturing enterprises over the period from 2012 to 2021, this research employs the instrumental variable method combined with two-stage least squares estimators to explore the U- shaped relationship between inventory leanness and financial constraints. Furthermore, the moderating role of digital transformation is demonstrated. Findings Contrary to traditional assumptions, our research uncovers a U-shaped relationship between inventory leanness and financial constraints, indicating that excessive inventory reduction can exacerbate financial constraints. Digital transformation plays a significant moderating role, particularly in highly digitalized environments. Practical implications Our findings have practical significance for top managers and policymakers. We advocate for a balanced approach to lean inventory management to mitigating financial constraints. The study emphasizes the pivotal role of digital transformation in alleviating the impact of inventory leanness on financial constraints, highlighting the need for digital transformation strategies. Originality/value This research provides a comprehensive analysis of inventory leanness, financial constraints and digital transformation dynamics. It challenges conventional thinking by revealing the nonlinear nature of the inventory leanness–financial constraints relationship. The concept of moderation highlights the moderating effect of digital transformation. This study offers practical guidance for practitioners and policymakers.

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References

2019Understanding digital transformation: A review and a research agenda 1997Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?2006Financial Constraints Risk 2011Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing 1977Toyota production system and Kanban system Materialization of just-in-time and respect-for-human system 2022Fintech, financial constraints and innovation: Evidence from China 2022Does the digital transformation of enterprises affect stock price crash risk?2010Lean, leaner, too lean? The inventory‐performance link revisited

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