The impact of customer concentration on the provision of reverse trade credit

Abstract

Purpose

The purpose of this study is to investigate the impact of customer concentration on the provision of reverse trade credit at the firm level.

Design/methodology/approach

Utilizing unbalanced panel data of Chinese A-share listed firms from 2007 to 2022 as the study sample, this paper employs a fixed-effects model to investigate the association between customer concentration and firms’ reverse trade credit.

Findings

This study finds that firms with higher customer concentration receive less reverse trade credit. Heterogeneity tests reveal a significant amplification of reverse trade credit in high-tech firms but a detrimental impact in large-sized, competitive and high-analyst-following firms. Further studies conclude that firms’ motivations, including bargaining power, financing and transaction guarantee motivations, collectively influence the extent of reverse trade credit acquisition.

Originality/value

To our knowledge, this paper represents the first attempt to conduct a comprehensive investigation of reverse trade credit, specifically through the lens of customer concentration, utilizing firm-level panel data sourced from a singular country.

Citation

Li, Y. and Zhang, M. (2024), "The impact of customer concentration on the provision of reverse trade credit", Asian Review of Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/ARA-01-2024-0030