Central Data Catalog

Citation Information

Type Working Paper
Title Inventories and Risk in African Manufacturing
Volume WPS/99
Issue 19
Publication (Day/Month/Year) 1999
URL http://www.csae.ox.ac.uk/workingpapers/abstrcts/9919abs.html
This paper analyses the effects of risk on the holding of inventories and liquid assets by manufacturing firms. Using a panel data set for Zimbabwe which includes firm-specific measures of contractual risk, we show that contractual risk has a major effect on the holding of stocks of inputs and, to a lesser extent, the constitution of cash reserves. This is consistent with the role of inventories as a hedge against stockout risk. By contrast, we find that firms facing more inter-annual market risk hold less inventories. This suggests that African manufacturers prefer adapting to long-term market fluctuations as they materialise rather than building up inventories. This interpretation is consistent with the finding that high market risk firms also have a low capacity utilisation rate.

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