An empirical analysis of inventory turnover behaviour in Greek retail sector: 2000–2005

In this study we investigate the determinants of inventory turnover. The study is based on an econometric analysis of inventory behaviour using an inventory turnover model. The empirical implementation of the model was conducted on a sample of financial data for 566 Greek retail firms for the period 2000–2005. By employing panel data techniques it was found that inventory turnover ratio is negatively correlated with gross margin and positively correlated with capital intensity and a measure of sales surprise. Decomposing the variance into its components associated with year, firm and retail segment effects, we found that a substantial amount of inventory turns variability is due to segment‐wise effects. Moreover, the inventory turnover reaction to different sales changes was also studied. It was estimated that changes in sales bring on bigger changes when firms operate in sales‐declined region. These results are useful in identifying methods and applications to improve inventory performance among firms and over time.