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Title: Change in inventory and firm valuation
Authors: Bao, BH
Bao, DH
Issue Date: 2004
Source: Review of quantitative finance and accounting, 2004, v. 22, no. 1, p. 53-71
Abstract: This study examines the effect of the informativeness of change in inventory on firm valuation. A firm's change in inventory is informative if its percentage change in cost of goods sold is positively and significantly associated with its lag one percentage of production added to inventory (a measure of change in inventory). Sample firms are divided into two groups: firms with informative change in inventory, and other firms. Analyses then are performed to examine the association between stock price and earnings. Results consistently show that the association is higher for firms with informative change in inventory. Thus, knowledge on the informativeness of change in inventory is useful for firm valuation.
Keywords: Change in inventory
Firm valuation
Stock prices
Journal: Review of Quantitative Finance and Accounting 
ISSN: 0924-865X
DOI: 10.1023/B:REQU.0000006187.13978.80
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