TY - JOUR
T1 - Customer concentration and stock price crash risk
AU - Lee, Sang Mook
AU - Jiraporn, Pornsit
AU - Song, Hakjoon
N1 - Publisher Copyright:
© 2020 Elsevier Inc.
PY - 2020/3
Y1 - 2020/3
N2 - 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.
AB - 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.
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U2 - 10.1016/j.jbusres.2020.01.049
DO - 10.1016/j.jbusres.2020.01.049
M3 - Article
AN - SCOPUS:85078919343
SN - 0148-2963
VL - 110
SP - 327
EP - 346
JO - Journal of Business Research
JF - Journal of Business Research
ER -