Customer concentration and firm risk: The role of outside directors from a major customer

Taeyeon Kim, Hyun-Dong Kim and Kwangwoo Park

Journal of Banking & Finance, 2023, vol. 152, issue C

Abstract: This paper examines the role of customer-affiliated outside directors on suppliers in reducing risk arising from having a major customer. Using a sample of US supplier firms, we find that a positive relationship between having a major customer and supplier risk is weakened with the presence of the major customer's representatives at suppliers' board. We further show that suppliers with customer-affiliated outside directors are more likely to have less conservative financial policies. Our results suggest that customers' board membership at suppliers helps mitigate the business risk due to the tightened supplier–customer relationship and reduced information asymmetry.

Keywords: Customer concentration; Major customer; Firm risk; Interlocked board; Outside directors; Relationship-specific investments; Information asymmetry (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 M40 M41 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426623000948
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:152:y:2023:i:c:s0378426623000948

DOI: 10.1016/j.jbankfin.2023.106870

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().