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Customer relationship and the operating performance following private placements

Fei Teng (School of Business, Sun Yat-Sen University, Guangzhou, China)
Xue Xia (School of Accounting, Dongbei University of Finance and Economics, Dalian, China)
Yu Xin (School of Business, Sun Yat-Sen University, Guangzhou, China)

Nankai Business Review International

ISSN: 2040-8749

Article publication date: 28 May 2021

Issue publication date: 8 September 2021




Close relationship with major customers, by curtailing opportunistic behaviors during private placements (PPs) and guaranteeing the production and sales of products after, is expected to facilitate the realization of PP’s strategic goals. However, major customers, on the contrary, may impair PP’s performance because of their strong bargaining power. Based on the transaction cost theory and relational contract theory, this paper aims to investigate the impact of major customers on firms’ strategic development in the context of private placements. The mechanisms of such impact are analyzed from the prospect of economies of scale, supervision and the rip-off effect by major customers. Further, the moderating role of the customer relationship investment (CRI) is considered.


Using a sample of China’s non-financial A-share listed firms during 2010-2016, this paper empirically investigates the impact of customer relationships on firms’ operating performance following PPs. In the main regressions, the sales growth rate serves as the dependent variable to measure PP’s operating performance, while the customer concentration proxies for the closeness of customer relationship. This study captures the impact of customer relationships on PPs’ performance by looking at the coefficient of the interaction term of post PP dummy and customer concentration. In the additional tests, selling and management expenses along with entertainment and traveling expenditures are used to measure customer relationship investment.


Results show that major customers help improve PPs’ strategic performance. The more concentrated the customer portfolio is, the higher operating performance will be after the PPs. Such a relationship is stronger when CRI is at a higher level. However, CRI also incurs costs, which impairs the effect of major customers on net profit. Further research finds that the effect of major customers is more pronounced in situations of extensional PPs, with actively interactive customers and in non-state-owned firms. In addition, state-owned customers with strong bargaining power have impaired the role of customers in promoting PP’s operating performance.


This paper validates the role of customers in firms’ strategic development. The study not only contributes to the research on the economic consequences of customers but also adds to the evolving literature of factors affecting the performance of PPs. The findings of the study have important practical implications for both customer relationship management and the supervision of PPs.



The paper is supported by the Fundamental Research Funds for the Central Universities (19wkpy19) and the National Natural Science Foundation of China (71772188, 71672198). The authors acknowledge gratitude to the anonymous reviewers and editors for their helpful comments. The authors are also grateful to Professor Liping Xu, Dr Xiankun Jin and Dr Xinyi Huang at School of Business, Sun Yat-sen University, for their kind suggestions.


Teng, F., Xia, X. and Xin, Y. (2021), "Customer relationship and the operating performance following private placements", Nankai Business Review International, Vol. 12 No. 2, pp. 194-219.



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