An Empirical Research On Additional Tariffs,Inventory Agility And Abnormal Return

The purpose of imposing additional tariffs is to put pressure on the countries to change their existing foreign trade policies.It is difficult to predict the overall economic effect of tariff protection in the global value chain.At the micro level,some listed enterprises will suffer from a significant decline in performance due to the increasing export costs.Besides,additional tariffs will also cause abnormal return in the capital market.It should be noted that abnormal return is not only arise from the exogenous factor,but also has link with the characteristics of enterprises.For example,it is very beneficial for enterprises to timely adjust and maintain the optimal inventory level during the crisis,avoiding inventory-related costs such as cost of capital and obsolescence costs.At the same time,companies which have a strong sense of market development and demand change and the ability to adapt to customer needs with new technologies,are likely to perform better during the crisis.Based on those,this paper empirically tested the relationship between additional tariffs and abnormal return,using data from listed firms at Shanghai and Shenzhen Stock Exchange Market.Moreover,the influence of those enterprise's own characteristics such as inventory agility,market orientation and technology orientation has also been tested.Firstly,this paper analyzes the influence of additional tariffs on trade,social welfare,production efficiency and enterprise behavior,basing on some recent examples and theoretical background.The large number of literature on inventory is divided into inventory research in periods of relative stability and inventory research during crisis periods.Inventory agility,an important variable of enterprise's own characteristics,is explained in detail.Besides,a brief introduction is given to the event-study method,especially its application in exploring trade policy.Then,in empirical research,a total of 1,081 listed firms,from Shanghai and Shenzhen Stock Exchange Market,were selected as research samples.It covers nine industries,including communication,electronics,computer,automobile,machinery,medicine and biology,national defense,food and beverage,agriculture and fishing.To test the relationship between additional tariffs and abnormal return,we use event study on the basis of yield data around March 23,2018.When it comes to enterprise's own characteristics,we choose three indexes,including inventory agility,market orientation and technology orientation.The results show that the additional tariffs will have a significant impact on the stock market,specifically,the stock market reaction to additional tariffs will be more negative for the industries on which tariffs are imposed.For the industries to be taxed,inventory agility negatively regulates the negative relationship between additional tariffs and abnormal return.To be truth,hypotheses of market orientation and technology orientation have not been verified.The possible explanations are as follows: the role of the enterprise's own characteristics is very small during the crisis;it will take a long time for performance to improve due to R&D investment;maybe some firms' R&D investment is symbolic innovation;and investors are disturbed by irrational factors.Finally,based on the theoretical and empirical analysis,this paper gives suggestions from three aspects——the regulators should strengthen the verification and transparency of listed firms' information disclosure and business operations;listed firms should improve inventory management,especially pay more attention to inventory agility;investors should avoid the interference of irrational emotions and attach importance to core competitiveness.