THE IMPACT OF INVENTORY MANAGEMENT ON FIRM PERFORMANCE: EMPIRICAL STUDY ON JORDANIAN INDUSTRIAL SECTOR

Abstract

The principal aim of this research is to explore howmanaging inventories—particularly the inventory cycle duration and stock turnover ratio—affects the financial efficiency of industrial enterprises in Jordan. Furthermore, empirical work considers the role of firm scale and financial leverage as controlling elements. To achieve this, a quantitative methodology was adopted, relying on panel data regression techniques. The analysis included 28 industrial firms listed on the Stock Exchange of Amman Stock Exchange, utilizing archival data sourced from official financial statements over the span of 17 years (2006–2023). The outcomes reveal that longer inventory cycles have a statistically significant negative influence on business profitability. In contrast, higher turnover rates are positively correlated with improved economic performance. Hence, the fewer days required to convert stock into revenue, the better the firm’s financial return. This paper concludes that efficient inventory practices contribute meaningfully to organizational success. It advises decision-makers to reduce the inventory cycle due to its tangible impact on profitability. Notably, the study’s finding also indicates that enterprise size exhibits no substantial influence on financial effectiveness.