Customer concentration and corporate risk-taking

Yue Cao, Yizhe Dong, Diandian Ma and Li Sun

Journal of Financial Stability, 2021, vol. 54, issue C

Abstract: This study empirically investigates the relationship between customer concentration and corporate risk-taking. We find that overall customer concentration significantly reduces corporate risk-taking. However, the relationship varies across different settings. Specifically, the negative relationship between customer-base concentration and corporate risk-taking is only significantly present in more marketized regions, more competitive industries, firms with lower market shares, less innovative and non-state-owned firms, and those without major governmental or state-owned-enterprise customers. Moreover, our panel threshold models indicate significant threshold effects. When customer-base concentration is below the first threshold (low concentration level), it is positively associated with corporate risk-taking. When customer-base concentration increases to above the second threshold, the association turns significantly negative, suggesting that a highly concentrated customer base prompts suppliers to take more precautionary measures and avoid excessive risk-taking. Overall, our findings suggest that the concentration of a supplier’s customer base significantly impacts its risk-taking behaviours.

Keywords: Customer concentration; Corporate risk-taking; Governmental major customer; Threshold effects (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:54:y:2021:i:c:s1572308921000504

DOI: 10.1016/j.jfs.2021.100890

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