Customer concentration and stock price crash risk

Sang Mook Lee, Pornsit Jiraporn and Hakjoon Song

Journal of Business Research, 2020, vol. 110, issue C, 327-346

Abstract: We investigate the impact of customer concentration on stock price crash risk. Customer concentration may represent a source of significant cash flow and business risk for supplier firms or benefit supplier firms in terms of efficient product, inventory and supply chain management. Using a large sample of firms for the period 1977–2016, we find that corporate customer concentration is positively associated with stock price crash risk. We find, however, that government customer concentration is negatively associated with stock price crash risk. Further analyses demonstrate that our results are robust to potential endogeneity and reverse causality concerns. In the cross-sectional analyses, we find that the likelihood that a supplier firm with a concentrated customer base experiences higher crash risk is attenuated by lower switching cost and is accentuated when the degree of information asymmetry is high.

Keywords: Corporate customer concentration; Government customer concentration; Stock price crash risk; Customer switching cost; Information asymmetry (search for similar items in EconPapers)
JEL-codes: G12 G14 M41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:110:y:2020:i:c:p:327-346

DOI: 10.1016/j.jbusres.2020.01.049

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