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How does customer concentration affect informal financing?

Xuan Peng, XiongYuan Wang and Lina Yan

International Review of Economics & Finance, 2019, vol. 63, issue C, 152-162

Abstract: We examine how customer concentration of a firm affects the amount of informal financing (trade credit) granted by the firm. Using a sample of Chinese public firms from 2007 to 2013, we document that customer concentration and informal financing are positively correlated. The findings are robust to alternative measures of customer concentration and informal financing and account for selection bias. We further report evidence that the impact of customer concentration on informal financing is less pronounced when the firm has high corporate risk. In contrast, when a firm has high financial leverage or receives a large amount of informal financing from its suppliers, the impact of customer concentration on informal financing granted is stronger. Our findings advance the informal financing literature by providing direct evidence on the impact of customer concentration.

Keywords: Customer concentration; Informal financing; Operating risk (search for similar items in EconPapers)
JEL-codes: G23 L11 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:63:y:2019:i:c:p:152-162

DOI: 10.1016/j.iref.2018.08.022

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