The Effect of Inventory Management Efficiency and Trade Credit on the Capital Structure Stability

One of the most important financial and managerial decisions of companies is determining the optimal amount of inventory needed for each period. The inventory of goods and commercial credit can be considered as one of the important items in supply chain management and as a source of short-term finance, respectively, which can be of great benefit to organizations if they are managed prudently. We investigated the effect of product inventory management and commercial credit on the stability of capital structure by using a dynamic combined data method with a generalized torque approach in 101 firms, listed in the Tehran Stock Exchange between 2006 and 2019. The results indicate that with increasing efficiency of inventory management, the stability of capital structure decreases based on the book and market leverage. In addition, based on the book leverage, when business credit goes up, the stability of the capital structure decreases, and based on the market leverage, with the increase of commercial credit, the stability of the capital structure reduces.