Inventory stockpiling and Covid-19 pandemic performance: evidence from Taiwanese firms

ABSTRACT

We hypothesize that firms holding more inventory before the pandemic can perform better during the pandemic year in 2020. We collect all listed firms from Taiwan Stock Exchange and test this hypothesis. We find supportive evidence that pre-Covid inventory stockpiling is valuable and can help firms perform better during the pandemic. High inventory-holding firms will have a higher return on equity and return on assets during the pandemic. The economic significance is also non-trivial. Our study thus contributes to understanding how the pandemic can affect corporate business and what lessons we can learn from this pandemic.

KEYWORDS:

• Inventory holdings
• Covid-19
• pandemic
• performance
• profitability

JEL CLASSIFICATION:

• G30
• G31

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ https://www.ey.com/en_gl/supply-chain/how-covid-19-impacted-supply-chains-and-what-comes-next

² https://www.weforum.org/agenda/2022/01/5-ways-the-covid-19-pandemic-has-changed-the-supply-chain/

³ For example, https://www.ibm.com/blogs/supply-chain/relocation-reverberations-how-pandemic-moves-have-impacted-demand-and-inventory-management/

⁴ In untabulated results, we find the same conclusion if we use a cross-sectional regression between ROE (or ROA) in 2020 and the inventory holdings in 2019.