The effect of major customer type on corporate capital structure

Saud Asaad Al-Thaqeb

Asia-Pacific Journal of Accounting & Economics, 2022, vol. 29, issue 5, 1394-1416

Abstract: This study examines the impact of governments as major customers on the firm’s capital structure. Our results show that major customer type significantly impacts capital structure. Firms with government (non-government) customers have higher (lower) leverage. The financial condition of firms with major customers offers some explanation: the results are stronger for financially constrained firms. Government (non-government) customers may give supplier firms more flexibility (pressure). The difference in the effect of customer type may be attributed to the differences in the risk associated with each type. Collectively, the findings support the view that dealing with governments as major customers can reduce risk.

Date: 2022
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DOI: 10.1080/16081625.2019.1636663

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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