Can Stakeholder Orientation Improve Inventory Efficiency? Evidence from a Quasi-Natural Experiment

Can Stakeholder Orientation Improve Inventory Efficiency? Evidence from a Quasi-Natural Experiment

Yunxiao Liu, Woochan Kim

Series number :

Serial Number: 
664/2020

Date posted :

March 06 2020

Last revised :

June 03 2020
SSRN Share

Keywords

  • Constituency statutes • 
  • stakeholder orientation • 
  • CSR • 
  • inventory efficiency • 
  • Firm performance

This study investigates whether and how firms’ stakeholder orientation affects their inventory efficiency as well as financial performance. Using U.S.

state legislatures’ staggered adoption of constituency statutes over a 24-year period (1984–2007) as a quasi-natural experiment, we show that greater stakeholder orientation significantly increases manufacturing firms’ inventory efficiency. We also find that this result is stronger in firms that can benefit the most from stakeholder orientation: firms facing dynamic environments, high labor intensity, or low customer concentration. Further mediation analysis reveals that the improvement in inventory efficiency is an important channel through which stakeholder orientation enhances firm value, thus providing evidence that stakeholder orientation decreases optimal inventory level. Additional analyses show that the improvement in inventory efficiency after constituency statutes adoption also holds for retailing firms, although to a lesser extent. Finally, our results survive a battery of robustness tests.
 

Authors

Real name:
Yunxiao Liu