Abstract
This study empirically investigates the relationship between customer concentration and corporate risk-taking. We find that overall customer concentration significantly reduces corporate risk-taking. However, the relationship varies across different settings. Specifically, the negative relationship between customer-base concentration and corporate risk-taking is only significantly present in more marketized regions, more competitive industries, firms with lower market shares, less innovative and non-state-owned firms, and those without major governmental or state-owned-enterprise customers. Moreover, our panel threshold models indicate significant threshold effects. When customer-base concentration is below the first threshold (low concentration level), it is positively associated with corporate risk-taking. When customer-base concentration increases to above the second threshold, the association turns significantly negative, suggesting that a highly concentrated customer base prompts suppliers to take more precautionary measures and avoid excessive risk-taking. Overall, our findings suggest that the concentration of a supplier’s customer base significantly impacts its risk-taking behaviours.
Original language | English |
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Article number | 100890 |
Journal | Journal of Financial Stability |
Volume | 54 |
Early online date | 14 May 2021 |
DOIs | |
Publication status | Published - Jun 2021 |
Keywords / Materials (for Non-textual outputs)
- customer concentration
- threshold effects
- corporate risk-taking
- governmental major customer