Inventory Management and Firm’s Performance During the Period of Financial Constraints: An Empirical Analysis of SME Sector in Greece

Abstract

Inventory is one of the most essential component of firm's current assets. Their efficient management notably determines the achievement of firm's economic and financial objects. The major objective of this study is to examine the effectiveness of inventory management adopted by small and medium enterprises (SME) in the region of Epirus, in Greece. The study cover ten years period, which we analyze first as a total period and then we divide it for the period prior 2008 and post 2008 using this year as the beginning of the recession in Greece and first year of serious financial constraints for Greek firms. The study empirically examines differences in inventory ratios, both total inventory and its discrete components (finished goods, work in process and raw materials) between main sectors of economic activity in the region of Epirus and the relationship between inventory management and firm performance on a sample of financial data for 612 enterprises. We find that in SMEs in Epirus region the median of inventory holding periods were 82,13 days. When we compare two periods: 2002-2008 and 2009-2011 we observed increase of median from 77,87 to 88,77. Inventory days increased most rapidly in construction sector. The greatest increase was found for finished goods inventory, (about 3% per year). By employing regression and correlation techniques, it was found that effective inventories' management is a necessary component of firm's future growth and profitability.

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Author Information
Ioannis Ganas, Technological Educational Institute of Epirus, Greece
Alina Hyz, Piraeus University of Applied Sciences, Greece

• Category: G – Financial Economics

Posted by James Alexander Gordon

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