Detecting overproduction: Evidence from inventory <scp>write‐down</scp>

Abstract We use inventory write‐downs to differentiate opportunistic and non‐opportunistic overproduction measures. posit that is positively associated with future because generally leads excess inventory, while (to inflate earnings) negatively decrease earnings. find change‐based proxies (deviations from past behaviour) are the likelihood of write‐downs, whereas residual‐based industry norms) this likelihood, suggesting former (latter) primarily capture (opportunistic) overproduction. Our study highlights importance using appropriate measures for each research setting.