Abstract
The purpose of this paper is to identify the relationships of debt finance and inventory management with firm economic value of energy industry in Saudi Arabia, from 2012 to 2019. The sample comprises of 32 firm-year observations throughout the eight years’ time frame until 2019. Pearson’s correlation, Pooled OLS Regression are used in this study. The findings of this study indicate to a negative association between debt finance and firm economic value. Furthermore, a positive association is reported between inventory management and firm economic value. The results of this study are important for energy industry in Saudi Arabia in making decisions related to debt financing. In addition, energy industry can use the results of this study in controlling their inventory practices. Further, the results of this study can be used in future research to gain a deeper understanding of the issues of debt finance, inventory management and firm economic value.
Highlights
Debt is employed by companies as a means of financing their activities (Damadoran, 2001)
This paper has examined the influence of debt financing and inventory management on company economic value for Saudi Arabia’s energy companies between 2012 and 2019
Employing Pooled Ordinary-Least Square (OLS) Regression, this research has demonstrated that debt financing has a negative impact on company profits
Summary
Debt is employed by companies as a means of financing their activities (Damadoran, 2001). Choosing to employ debt financing is regarded as a crucial financial decision for all companies. Every company wants to achieve the maximum possible return and choosing to take on debt can negatively affect profit. Companies employ debt for financing what they presume will be successful projects. If the projects succeed as hoped, the firm will get a good return on its investments and be able to pay their debt and to use the funds left over for further investment. Should projects not succeed, company performance can be adversely impacted for a considerable period (Stiglitz and Weiss, 1981)
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