Customer concentration risk and the cost of equity capital

• 成果类型: Article
• 署名作者: Dhaliwal, Dan; Judd, J. Scott; Serfling, Matthew; Shaikh, Sarah
• 署名单位: University of Arizona; Korea University; University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital; University of Tennessee System; University of Tennessee Knoxville; University of Washington; University of Washington Seattle
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2015.03.005
• 发表日期: 2016
• 关键词: IMPLIED COST; Supplier relationships; government contracts; corporate suppliers; FINANCIAL RATIOS; earnings quality; disclosure; INFORMATION; determinants; performance

摘要

This study investigates the relation between customer concentration and a supplier's cost of equity capital. We hypothesize that a more concentrated customer base increases a supplier's risk, which results in a higher cost of equity. Our results show a positive association between customer concentration and a supplier's cost of equity, and this relation is more pronounced for suppliers that are more likely to lose major customers or that are more prone to larger losses if they lose such customers. Further, results from a propensity score matched sample analysis and instrumental variables regressions imply that our findings are robust to accounting for endogeneity. We also provide evidence that a supplier with a concentrated base of safer government customers has a lower cost of equity. Finally, we document a positive relation between corporate customer concentration and a supplier's cost of debt. Overall, our findings suggest that the composition and concentration of a supplier's customer base significantly impact its financing costs. (C) 2015 Elsevier B.V. All rights reserved.