The Effect of Firms’ Bargaining Power on the Relationship Between Financial Constraint and Inventory Adjustment Speed

Document Type : Research Paper

Authors

1 Department of Accounting, Faculty of Business and Economics, Persian Gulf University, Bushehr, Iran

2 Master of Science in Accounting, Zanjan Science and Research Branch, Islamic Azad University, Zanjan, Iran

3 Payam Noor University of Fars evaz unit

Abstract

Inventory planning and control is one of the critical activities in the supply chain and logistics systems for managers’ future decision-making. Since inventory constitutes a significant portion of a firm’s asset investment, any deviation from optimal inventory levels is ultimately penalized by the firm’s financial performance. Therefore, determining the optimal inventory level under demand uncertainty is considered the most crucial factor affecting profitability in companies. The objective of the current study is to investigate the effect of firms’ bargaining power on the relationship between financial constraint and inventory adjustment speed. The statistical population of the research includes firms listed on the Tehran Stock Exchange between 2012 and 2024. Using the systematic exclusion sampling method, 149 firms were selected as the final sample, representing 1937 firm-years over the 13-year period. The Generalized Method of Moments (GMM) was used to test the research hypotheses. The results of the hypothesis testing showed that the speed of inventory adjustment in the sample firms is approximately 68%. This means that firms strive to reduce the gap created between actual inventory and target inventory by this amount, moving toward the optimal inventory level at this speed. Financial constraint reduces the speed of inventory adjustment toward the optimal inventory. However, the interaction between bargaining power and financial constraint can increase the speed of inventory adjustment toward the optimal inventory, indicating that bargaining power plays a moderating role in the relationship between financial constraint and inventory adjustment speed.

Keywords

Main Subjects

References

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Journal of Accounting Advances
Volume 18, Issue 1
September 2026
Pages 185-216

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History

  • Receive Date: 22 November 2025
  • Revise Date: 20 March 2026
  • Accept Date: 25 April 2026

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