The effect of customer concentration on stock sentiment risk

Jian Wang, Yanhuang Huang, Hongrui Feng, Jun Yang

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


The impact of stock sentiment risk on their returns has been well documented in literature, but exploration into the determinants of stock sentiment risk is lacking. We theorize that concentrated customer bases help mitigate stock sentiment risk. Empirical results based on a large sample from the U.S. market strongly support this hypothesis. Specifically, the mitigating effect takes place through three channels. Companies with high customer concentration tend to have better performance and information quality and attract more long-horizon institutional investors. All these factors contribute to diminishing stock sentiment risk. The results are robust when the endogeneity concern is addressed by investigating the effect of an exogenous shock, or when they are examined with alternative measures of sentiment risk. The negative relationship between customer concentration and stock sentiment risk is ubiquitous but even stronger during the 2008 financial crisis.

Original languageEnglish (US)
Pages (from-to)565-606
Number of pages42
JournalReview of Quantitative Finance and Accounting
Issue number2
StatePublished - Feb 2023

All Science Journal Classification (ASJC) codes

  • Accounting
  • General Business, Management and Accounting
  • Finance


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