Inventory and firm performance nexus: The influence of capital intensity

Abstract

This study investigates the relationship between inventory management and firm performance, with a focus on the mediating role of capital intensity in manufacturing firms listed on Vietnam’s three major stock exchanges. Using a dataset spanning 2013–2023 from the website https://vietstock.vn/, the study employs a multiple regression framework to analyze the impact of inventory turnover, inventory days, on firm performance, measured by return on assets (ROA) and return on equity (ROE), and the impact of capital intensity on this relationship. The findings reveal that efficient inventory management positively influences firm performance, while longer inventory holding periods negatively impact profitability. Capital intensity is identified as a significant mediator, amplifying the positive effects of inventory practices on performance, despite its standalone negative influence. Control variables, such as liquidity, firm size, and leverage, further contextualize the results. This study contributes to the literature by integrating capital intensity as a mediator, offering insights into the inventory-performance nexus in the context of an emerging market. The findings provide practical implications for firms to align inventory strategies with capital investments for improved operational efficiency and competitiveness.