Twelve. Production/Inventory Management and Capital Structure

  1. Panos Kouvelis5,
  2. Lingxiu Dong5,
  3. Onur Boyabatli6 and
  4. Rong Li6
  1. Qiaohai (Joice) Hu1,
  2. Lode Li2,3 and
  3. Matthew J. Sobel4

Published Online: 11 OCT 2011

DOI: 10.1002/9781118115800.ch12

The Handbook of Integrated Risk Management in Global Supply Chains

The Handbook of Integrated Risk Management in Global Supply Chains

How to Cite

Hu, Q., Li, L. and Sobel, M. J. (2011) Production/Inventory Management and Capital Structure, in The Handbook of Integrated Risk Management in Global Supply Chains (eds P. Kouvelis, L. Dong, O. Boyabatli and R. Li), John Wiley & Sons, Inc., Hoboken, NJ, USA. doi: 10.1002/9781118115800.ch12

Editor Information

  1. 5

    Olin Business School, Washington University, St. Louis, Missouri, USA

  2. 6

    Lee Kong Chian School of Business, Singapore Management University, Singapore

Author Information

  1. 1

    Krannert School of Management, Purdue University, West Lafayette, Indiana, USA

  2. 2

    Yale School of Management, New Haven, Connecticut, USA

  3. 3

    Cheung Kong Graduate School of Business, Beijing, People's Republic of China

  4. 4

    Weatherhead School of Management, Case Western Reserve University, Cleveland, Ohio, USA

Publication History

  1. Published Online: 11 OCT 2011
  2. Published Print: 4 NOV 2011

ISBN Information

Print ISBN: 9780470535127

Online ISBN: 9781118115800

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Keywords:

  • bankruptcy;
  • capital structure;
  • finance;
  • inventory management;
  • long-term decision;
  • production management

Summary

Businesses manage flows of material and cash, and large firms decentralize these tasks into separate functional responsibilities in spite of the interactions; material needs capital and sales of goods contributes to cash reserves. Management research and education mimics this dichotomy into operations and finance. The research and pedagogical literatures on production/inventory management focus on operations analyses without being concerned directly with finance, and the analogous finance literatures focus on financial decisions while suppressing operational details. This chapter shows that professional practice that is consistent with these dichotomies diminishes the value of firms. It summarizes the findings in Li, Shubik and Sobel and Hu and Sobel, which focus on the issues regarding the coordination of operational decisions and financial decisions and on how such efforts affect the firm’s capital structure. The chapter discusses the extensions and variations of the basic model, including “wipeout” bankruptcy and the effects of precluding capital subscriptions.

Controlled Vocabulary Terms

bankruptcy; capital structure; inventory management