Journal Article: 'When climate risk rises, so do inventories: international evidence on firm adaptation ' Prof. A. Athira
Purpose
Climate change poses significant risks to global businesses by disrupting supply chains and raising operational costs. This study examines how country-level climate change risk (CCR) influences firms’ inventory management practices.
Design/methodology/approach
Using a panel of firms from 89 countries over the period 1999–2019, obtained from Refinitiv Eikon and Datastream, we employ two-way fixed-effects OLS regressions to analyze the impact of CCR on inventory ratios, followed by multiple robustness checks. We further test the moderating roles of adjustment costs and financial flexibility.
Findings
Results provide empirical support for resource dependence theory (RDT), showing that firms hold higher inventory ratios as buffers against CCR. However, asset- and R&D-intensive firms maintain lower inventory ratios, reflecting the reduced suitability of buffers amid already high adjustment costs. Firms with greater financial flexibility sustain larger inventory buffers. Additional analyses indicate that firms with higher inventory intensity extend more trade credit.
Originality/value
This study is among the first cross-country investigations that link CCR, viewed as a chronic source of uncertainty, to firm-level inventory buffers. Drawing on RDT, it advances understanding of how firms operationally adapt to CCR and highlights inventory buffering as a strategic mechanism for building resilience in global supply chains.
Authors’ Names: Vishnu K. Ramesh, A. Athira and A. Rajeev
Journal Name: International Journal of Operations & Production Management.
Journal Article: 'When climate risk rises, so do inventories: international evidence on firm adaptation ' Prof. A. Athira
Purpose
Climate change poses significant risks to global businesses by disrupting supply chains and raising operational costs. This study examines how country-level climate change risk (CCR) influences firms’ inventory management practices.
Design/methodology/approach
Using a panel of firms from 89 countries over the period 1999–2019, obtained from Refinitiv Eikon and Datastream, we employ two-way fixed-effects OLS regressions to analyze the impact of CCR on inventory ratios, followed by multiple robustness checks. We further test the moderating roles of adjustment costs and financial flexibility.
Findings
Results provide empirical support for resource dependence theory (RDT), showing that firms hold higher inventory ratios as buffers against CCR. However, asset- and R&D-intensive firms maintain lower inventory ratios, reflecting the reduced suitability of buffers amid already high adjustment costs. Firms with greater financial flexibility sustain larger inventory buffers. Additional analyses indicate that firms with higher inventory intensity extend more trade credit.
Originality/value
This study is among the first cross-country investigations that link CCR, viewed as a chronic source of uncertainty, to firm-level inventory buffers. Drawing on RDT, it advances understanding of how firms operationally adapt to CCR and highlights inventory buffering as a strategic mechanism for building resilience in global supply chains.
Authors’ Names: Vishnu K. Ramesh, A. Athira and A. Rajeev
Journal Name: International Journal of Operations & Production Management.