This paper examines the stock market reaction and analysts’ earnings forecast revisions associated with just‐in‐time (JIT) inventory system adoption announcements. The stock market reaction is positive, however, analysts do not revise their earnings forecasts when firms announce a JIT adoption. The results of the paper show mixed support for the hypothesis that JIT is viewed by markets as a costly capital expenditure intended to increase the net cash flows of the firm and mixed support for the hypothesis that JIT is viewed by markets only as an accounting change.
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Howton et al. (2000) studied this question.