How Credit Extension Management affects Inventory Practices

The aim of this paper is to analyze the impact credit extension management has on inventory management practices for a sample of 432 micro and small enterprises (MSEs). The model relied on agency, transaction cost and pecking order theories. Sample data were subjected to multivariate techniques of exploratory and confirmatory factor analysis and simultaneous structural regressions. Results support the idea that credit management practices positively determine inventory management, when mediated by cash management. The study measured direct and indirect effects among the three latent construct variables.

credit extension; internal cash management; inventories; structural equations