Operational leanness as a predictor of credit strength in emerging market firms: Panel data evidence from the manufacturing sector

This study examines the impact of operational leanness on the credit ratings of manufacturing firms listed on the Pakistan Stock Exchange, focusing specifically on inventory and property, plant, and equipment (PPE) leanness. Utilizing panel data from 80 firms rated by the Pakistan Credit Rating Agency (PACRA) over the period 2008 to 2021, the analysis employs panel regression models that control for firm size, leverage, interest coverage, capital intensity, and dummy variables for financial loss and subordinate debt. The results indicate a significant relationship between operational leanness and credit ratings. In particular, firms demonstrating more efficient inventory management receive higher credit ratings than those with less efficient inventory practices, highlighting lean inventory as a positive signal of financial discipline and operational robustness. These findings offer important implications for corporate managers, investors, and rating agencies within emerging market contexts.