On the relationship between inventory turnover performance and capital intensity and sales growth evidence from the listed companies at Ho Chi Minh stock exchange

Abstract

Inventory turnover varies broadly across many companies and over time. This variation is useful for analyzing an inventory turnover performance and working capital management. By conducting a panel data of 179 Vietnamese companies listed in Ho Chi Minh Stock Exchange (HOSE) during the period of 2006-2011, we perform an empirical study with the fixed effect methodology to investigate the correlation of inventory turnover with capital intensity and sales growth. We find that both capital intensity and sales growth have a positive impact on inventory turnover. We also split two datasets based on firms in the real estate industry and in other industries. We only find that both gross margin and firm size are negatively correlated with inventory turnover in the dataset of firms in other industries. In general, our results are consistent with the previous studies of United State retailers. We also consider the time-trend to examine impacts of these factors. The results show that on average, firms with bigger investment in capital assets have achieved higher inventory turnover, but inventory turnover becomes worse as the time goes on.