The Efficiency of Inventory Management and Financial Distress: The Interactive Role of Management Behavioral Strains

Abstract

The objective of this study is to examine the effect of inventory management on financial distress with respect to the interactive role of management behavioral strains, namely overconfidence, myopic, and narcissism. The data of the study comprised of 346 years-distressed company and 346 years-healthy company for overconfidence, 356 years-distressed company and 356 years-healthy company for myopic, 228 years-distressed company and 228 years-Health Company for narcissism, chosen from the companies listed in Tehran Stock Exchange through the years 2009 to 2019. To distinguish the healthy companies from the distressed companies, the model developed by Asquith et al. (1994) was used. Findings of the study showed that the increase of inventory management efficiency results in decreased financial distress, and the behavioral strains do not have a significant effect on the change of such a relationship.