Customer concentration and M&A performance

Yizhe Dong, Chang Li, Haoyu Li

Research output: Contribution to journalArticlepeer-review


This paper examines how the target’s customer concentration affects merger performance. We find that the acquirer purchasing a customer-concentrated firm experiences significantly lower stock market returns and worse long-run operating performance. The effect is more pronounced when customers face lower switching costs or the target undertakes a higher level of relationship-specific investments, exhibits higher cash volatility, or is acquired by a less well-known company. Further analysis shows that the negative association is mainly driven by corporate customers, while relatively safe government customers moderate the effect. We also find that shared major customers, overconfident CEOs, and poor corporate governance are more likely to increase the likelihood of customer-concentrated acquisitions. Overall, our findings suggest that higher customer concentration leads to lower value creation in mergers.
Original languageEnglish
Article number102021
JournalJournal of Corporate Finance
Early online date25 Jun 2021
Publication statusPublished - Aug 2021


  • customer concentration
  • mergers and acquisitions
  • announcement return
  • major government customer


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