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Operations in an Omnichannel World: Introduction Read chapter Read first chapter

2019 | OriginalPaper | Chapter

Determinants of Excess Inventory Announcement and Stock Market Reaction in the Retail Sector

Authors : Hyun Seok (Huck) Lee, Saravanan Kesavan

Published in: Operations in an Omnichannel World

Publisher: Springer International Publishing

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Abstract

In this paper, we empirically analyze the determinants of excess inventory announcement and the stock market reaction to the announcement in the US retail sector. We examine if the firm’s operational competence, as measured by total factor productivity (TFP), can explain the retailer’s excess inventory announcement. We also investigate if the stock market reaction to such announcements is conditional on the operational competence of the announcing firm. We use a combined dataset on excess inventory announcements, annual financial statements, and daily stock prices of publicly traded retailers in the USA between 1990 and 2011. We find that operationally competent retailers have a lower probability of announcing excess inventory in the following year. In addition, the stock market penalizes excess inventory announcements made by operationally competent retailers more severely than those made by their less competent peers. Finally, providing action information, which the firm has taken or plans to take to deal with the excess inventory, moderates the negative association between firm’s operational competence and abnormal returns due to the announcement, whereas we do not find such moderating effect with reason information.

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Metadata
Title
Determinants of Excess Inventory Announcement and Stock Market Reaction in the Retail Sector
Authors
Hyun Seok (Huck) Lee
Saravanan Kesavan
Copyright Year
2019
Book
Operations in an Omnichannel World

Print ISBN: 978-3-030-20118-0

Electronic ISBN: 978-3-030-20119-7

Copyright Year: 2019

DOI
https://doi.org/10.1007/978-3-030-20119-7_9