Work

Managers' Inventory Holding Decisions in Response to Natural Disasters

Year: 2025

Type: article

Abstract: ABSTRACT We study how firms' inventory holdings are affected by natural disasters. Building on the premise that managers often make decisions in line with the availability heuristic, we investigate whether managers increase inventory holdings in response to heightened disaster risk perceptions and the need to hedge against inventory shortages. Through a battery of tests, we show that the occurrence of disasters in neighboring counties triggers inventory stockpiling, an effect that is unlikely to be driven by the real disaster disruptions. Our results also indicate that inventory stockpiling is likely inconsistent with a rational expectations equilibrium. Collectively, our results highlight another undesirable consequence of natural disasters and warn about supply chain implications due to increased climate ambiguity. Data Availability: All the data used in this study are publicly available. JEL Classifications: G31; G41; M21; M11; M41; Q54.

Source: The Accounting Review

DOI: 10.2308/tar-2023-0568

Authors: Seunghyun Cho, Boochun Jung, Felipe Bastos G. Silva, Choong-Yuel Yoo

Institutions: Korea Advanced Institute of Science and Technology, Kyungpook National University, University of Hawaiʻi at Mānoa, Cornerstone Research Group (United States)

Language: English

Topic: Supply Chain and Inventory Management

Subfield: Management Information Systems

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: bronze

Funder: Korea Advanced Institute of Science and Technology

OpenAlex ID: W4416957640