Management Science and Financial Engineering

The Korean Operations Research and Management Science Society (한국경영과학회)
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Global Production vs. Inventory Supply and Financial Performance: Evidence from Korean Multinational Firms

  • Lee, Seungrae (School of Economics and Trade, Kyungpook National University) ;
  • Park, Seung Jae (School of Business, Ewha Womans University)
  • Received : 2016.05.15
  • Accepted : 2016.05.29
  • Published : 2016.05.31
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Abstract

We analyze how firms' global production activities affect their inventory supply and financial performance in regards to its production location. For the analysis, we use information on global production quantities of 3,076 Korean multinational firms that operate business in Europe and Asia through foreign direct investment (FDI) from 2006 to 2013. Our estimation results show that an increase in global production ratio, measured by global production/total production, decreases inventory supply and financial performance of firms that produce in European countries, while it decreases financial performance of firms that produce in Asian countries. Although our results indicate that global production decreases financial performance of firms that produce in Europe and Asia, we find that its negative effects on financial performance are different based on the market demand uncertainty.

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References

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