Major Customer Reliance and SG&A Cost Sensitivity

Haomin Zhang, Ci Zhang, Zhijun Lin and Di Fan

Accounting and Finance, 2025, vol. 65, issue 3, 2609-2625

Abstract: This paper examines the impact of major customer reliance on the sensitivity of selling, general and administrative (SG&A) costs in response to sales fluctuations. Utilising an expanded cost sensitivity model and conducting a thorough analysis of US‐listed firms, we uncover that supplier firms with a higher degree of dependence on major customers demonstrate a notably decreased sensitivity of SG&A costs to both increases and decreases in sales. Furthermore, our analysis reveals that the negative association between major customer reliance and SG&A cost sensitivity is significantly influenced by factors such as industry characteristics, relationship‐specific investments and customer types. Finally, our insights into SG&A costs can be extended to encompass total costs and operating costs, offering valuable insights into broader cost management dynamics and strategies.

Date: 2025
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