Investigating the Relationship between Changes in Inventory, Profitability and Value of Companies Listed in Tehran Stock Exchange

The main objective of this study is to investigate the relationship between changes in inventory، changes in profitability and firm’s value. Another goal of this study is to examine the influence of changes in accounts receivable and administrative costs and sales on the relationship between changes in inventory، changes in profitability and firm’s value. For this purpose، four main hypotheses and six sub-hypotheses were developed. A sample of 96 companies were selected having features proposed in this survey during from 2004 to 2009. In this research we used Hausman، Chow and Breush-Pagan LM tests to determine an appropriate estimate model. Also، to test the research hypotheses we conducted correlation analysis (Pearson coefficient) and regression. The results of testing sub-hypotheses 1-1 and the main second hypothesis indicated significant negative relationship between changes in inventory، short-term changes in firm earnings and changes in firm’s value. Further، the results of sub-hypotheses 1-2 and 1-3 indicated no significant relationship between changes in inventory with long-term changes in firm earnings and changes in asset returns. Further more، the results of third and fourth hypotheses show that there is no significant relationship between control variables with changes in inventories، firm’s profitability and value.