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Article
Publication date: 27 March 2020

HyunJun Na

This paper aims to examine how a firm’s customer concentration, which is the amount of sales between a supplier firm and the major customers, affects corporate bond…

Abstract

Purpose

This paper aims to examine how a firm’s customer concentration, which is the amount of sales between a supplier firm and the major customers, affects corporate bond contracts. This study also investigates how the types of customer concentration have a significant impact on bond contracts.

Design/methodology/approach

The research uses the Compustat’s segment customer database and the Mergent fixed income securities database, which provides details about publicly offered US bond issues and issuers. The sample also includes the US Congressional committees’ data from the 96th to 115th congresses. To control any endogenous concerns, the author uses changes in the seniority of US senators on powerful committees and the American Recovery and Reinvestment Act of 2009 (ARRA) as exogenous shocks. For a robustness test, the author also uses the propensity score-matched pairs.

Findings

While higher customer concentration, on average, leads to higher yield spreads and strict covenants, firms that have the US Government as a major customer pay lower yield spreads and have higher issue ratings. However, as a firm’s sales depend too heavily on the US Government customer channel, the bond issuance is likely to have lower issue ratings. The main findings also show that firms with government concentrations take advantage of political links, leading to lower yield spreads after two exogenous events.

Originality/value

The findings in this paper show the importance of a firm’s customer types in bond markets by emphasizing the positive impact of the US Government as the sales channel. Exogenous event studies based on the propensity-matched sample alleviate the endogenous concerns.

Details

Review of Accounting and Finance, vol. 19 no. 2
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 8 May 2017

Ziyun Yang

The purpose of this paper is to examine the effect of a firm’s customer base concentration on its loan contract terms and how this effect varies with the strength of its…

Abstract

Purpose

The purpose of this paper is to examine the effect of a firm’s customer base concentration on its loan contract terms and how this effect varies with the strength of its customer relationship.

Design/methodology/approach

This study is an archival research based on a sample of US public firms that have loan contract data between 1990 and 2008. Major customer sales data are used to construct customer concentration and customer relationship measures. A debt contract model is employed to relate loan spread and other contract terms to customer concentration and relationship.

Findings

This study finds that firms with more concentrated customer bases have higher loan spread and shorter loan maturity and are more likely to issue secured loans. These negative effects disappear when the supplier firm maintains strong relationship with its customers.

Research limitations/implications

Additional forward-looking measure of customer relationship could benefit future research.

Practical implications

A firm’s customer base characteristics can have significant impacts on the terms of its loan contracts. Findings from this study support the notion that customer relationship is an important intangible asset that is informative to stakeholders of the firm.

Originality/value

This study proposes a new measure of customer relationship based on the past repeated relationships between a firm and its major customers. It shows that customer characteristics may affect firms’ contracts with creditors: customer base concentration increases credit risk whereas strong customer relationship improves credit quality.

Details

Journal of Applied Accounting Research, vol. 18 no. 2
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 6 April 2021

Hanmei Chen, Weishi Jia, Shuo Li and Zenghui Liu

The purpose of this paper is to examine how the concentration of a specific customer type – governmental customer, affects the pricing of audit services in the USA.

Abstract

Purpose

The purpose of this paper is to examine how the concentration of a specific customer type – governmental customer, affects the pricing of audit services in the USA.

Design/methodology/approach

This paper applies a standard audit pricing model by regressing audit fees on governmental customer concentration and other common determinants of audit fees. This paper also adopts an instrumental variable approach and performs propensity-score matched sample analyzes to mitigate the potential endogeneity problem.

Findings

Using data from major customer disclosures of US publicly listed firms from 2000 to 2014, this paper finds that governmental customer concentration is positively associated with audit fees, suggesting that a higher level of governmental customer concentration increases a firm’s audit risks and audit effort. In addition, this paper performs cross-sectional analyzes and show that the association between governmental customer concentration and audit fees is more pronounced for firms with weak internal governance, weak external monitoring and high financial risks.

Originality/value

This paper furthers the understanding of the interactive relationships in supply chain systems and adds new evidence to the literature on customer concentration. Prior studies on customer concentration typically treat all customer types in a uniform manner. To the knowledge, this is the first study that separates governmental customers from other types of customers in an audit pricing setting. The findings highlight the importance of examining governmental customer concentration when assessing a firm’s audit risks and audit fees.

Details

Managerial Auditing Journal, vol. 36 no. 2
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 14 November 2016

Thang V. Nguyen, Garry D. Bruton and Binh T. Nguyen

The purpose of this paper is to examine whether competitor concentration relates to better customer acceptance of the firm’s offerings and better networking of the firm…

Abstract

Purpose

The purpose of this paper is to examine whether competitor concentration relates to better customer acceptance of the firm’s offerings and better networking of the firm with competitors and government officials.

Design/methodology/approach

The research is conducted in the context of the transition economy of Vietnam, using a combination of methods. Qualitative interviews are followed by a survey of 199 small firms in Hanoi, Vietnam. Since competitor concentration is count data, Poisson regression is used to test the relationship between networking, customer acceptance, and competitor concentration.

Findings

The results show that locating in a competitor concentration area improves customer acceptance of the firm’s offerings and increases networking with competitors, while decreasing networking with government officials. Competitor concentration does not help improve firm performance.

Research limitations/implications

A sample of 199 businesses in the food, furniture, and jewelry sectors in Hanoi may not be representative of all private businesses in Vietnam. The use of cross-sectional data could not establish causational relationships among variables.

Practical implications

Small firms in transition economies should be aware of the trade-offs between initial customer acceptance and negative consequences of being in a competitor concentrated area. Thus, once the firm’s offerings are generally accepted by customers, the firm may consider moving out of competitor concentration areas to expand and differentiate.

Originality/value

This paper points out that in the absence of effective market institutions, businesses want to be located near a concentration of similar firms as a means of gaining initial customer acceptance. This initial acceptance does not necessarily help firms improve business performance beyond the firm’s survival.

Details

Asia Pacific Journal of Marketing and Logistics, vol. 28 no. 5
Type: Research Article
ISSN: 1355-5855

Keywords

Article
Publication date: 1 November 2022

Lei Zhu, Wanyi Chen and Qianwen Zheng

Emerging markets are characterized by weak institutions and strong relationships, which give rise to different market characteristics in supply chain relationships. This…

Abstract

Purpose

Emerging markets are characterized by weak institutions and strong relationships, which give rise to different market characteristics in supply chain relationships. This study investigates the impact of customer concentration on suppliers' real earnings management.

Design/methodology/approach

Based on China's relationship-based transaction, this study selects 2007–2019 Shenzhen and Shanghai Stock Exchange A-share manufacturing listed companies as the research samples. The empirical analysis is derived from the ordinary least square regression model with industry and year fixed effects, and cross-sectional analysis is used for further analysis.

Findings

It is found that the higher the degree of customer concentration, the more likely a company is to engage in real earnings management mainly through discretionary expenses instead of accrual-based earnings management. Further research shows that when suppliers provide customers with higher commercial credit and make more relationship-specific investments, and when major customers are also major suppliers, the effect of customer concentration on real earnings management is more significant. It can be seen from the results that high customer concentration is beneficial for suppliers to cooperate with major customers in emerging markets.

Originality/value

This research expands the relationship between customer relationship-based transaction and earnings management from the perspective of collaboration. These conclusions are of great significance for market regulators to reform information disclosure related to customers and for participants to pay attention to the composition of major customers of the company.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 14 June 2011

Lucia Gibilaro and Gianluca Mattarocci

The aim of the paper is to study the degree of independence of customers' portfolio concentration measure from the pricing policy adopted by rating agencies.

Abstract

Purpose

The aim of the paper is to study the degree of independence of customers' portfolio concentration measure from the pricing policy adopted by rating agencies.

Design/methodology/approach

The paper tests different measures of customers value (revenues or profits and customer lifetime value) and different concentration measure (top customer or Herfindahl‐Hirschman index) on the customers' portfolio of rating agencies in the time period 1999‐2008. Simulating different pricing models, the paper tests the sensitivity of these measures to discounted fees applied to best customers and identifies measures that are more and less sensitive to the discount applied.

Findings

Concentration measures that consider all the customers' portfolios and look at both cost and revenues related to the service on a multi‐period time horizon (CLV) are less sensitive to the discount policy respect to the others.

Research limitations/implications

Results point out some opportunities related to apply more complete approaches defined by marketing science on the financial service industry in order to construct better measures for the economic independence. The paper works only with publicly available data and more details about the fee applied to each customer could increase the significance of the results achieved.

Practical implications

The paper contributes to the current debate on the economic independence of rating agencies stressing the opportunity of rethinking the measures on economic independence that are currently considered by supervisory authorities.

Social implications

The paper is the first empirical application of standard marketing concepts of customers' concentration measure to the rating industry.

Originality/value

The paper studies the pricing policies adopted by ratings agencies.

Details

International Journal of Bank Marketing, vol. 29 no. 4
Type: Research Article
ISSN: 0265-2323

Keywords

Article
Publication date: 28 May 2021

Fei Teng, Xue Xia and Yu Xin

Close relationship with major customers, by curtailing opportunistic behaviors during private placements (PPs) and guaranteeing the production and sales of products after…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

Nankai Business Review International, vol. 12 no. 2
Type: Research Article
ISSN: 2040-8749

Keywords

Article
Publication date: 1 November 2022

Zhaojun Han, Miao Hu, Yan Zuo and Shenyang Jiang

This study addresses an important research question regarding how supplier-base concentration affects buyer efficiency. Drawing on the contradicting views of transaction…

Abstract

Purpose

This study addresses an important research question regarding how supplier-base concentration affects buyer efficiency. Drawing on the contradicting views of transaction cost theory (TCT) and resource dependence theory (RDT), the authors explore the main effect of supplier-base concentration on buyer efficiency and how this effect is contingent on buyers' characteristics (i.e. research and development (R&D) expenditure and market share).

Design/methodology/approach

Based on data collected from the Chinese manufacturing firms listed on National Equities Exchange and Quotations (NEEQ) between 2015 and 2019, the authors use a fixed-effect model as well as a two-stage least squares model to test the predictions.

Findings

The authors find that supplier-base concentration has a positive effect on buyer efficiency. In addition, when a buyer has higher levels of R&D expenditure and market share, the positive relationship between supplier-base concentration and buyer efficiency is strengthened.

Originality/value

This study contributes to a better understanding of the effect of supplier-base concentration. First, the authors provide theoretical and empirical evidence of the positive effect of supplier-base concentration on buyer efficiency. Second, the authors reveal the underlying mechanism of how to counter the potential drawbacks and benefit more from supply base reduction by introducing R&D expenditure and market share as contingencies.

Details

International Journal of Physical Distribution & Logistics Management, vol. 52 no. 9/10
Type: Research Article
ISSN: 0960-0035

Keywords

Article
Publication date: 7 March 2016

Dongwei Li, Han Lin and Ya-wen Yang

– This study aims to examine whether the association between stakeholders and corporate social responsibility (CSR) documented in developed countries exists in China.

2285

Abstract

Purpose

This study aims to examine whether the association between stakeholders and corporate social responsibility (CSR) documented in developed countries exists in China.

Design/methodology/approach

This study tests the hypothesis and examines the impact of the central government, political connection, shareholders, customers, suppliers, employees and foreign investors on CSR practices by estimating the ordinary least squares regressions.

Findings

Using the CSR indexes developed by the Chinese Academy of Social Science (CASS), this study finds that the central government, supplier concentration and foreign investors are positively associated with CSR, whereas shareholder concentration and customer concentration are negatively associated with CSR in China. Inconsistent with findings documented in developed countries, the result indicates that employee power is not associated with CSR.

Originality/value

This paper extends prior research by including stakeholders, such as government and foreign investors, who have a unique impact on CSR activities in emerging markets in addition to other stakeholders. The findings have implications in other countries where state ownership is also prevalent (Claessens et al., 2000; Faccio and Lang, 2002). While the issue of CSR has attracted growing research interest in recent years, most empirical results are based on the US data. This paper contributes to the empirical CSR research by examining determinants of CSR in an emerging market. Interestingly, some of the findings are contrary to those documented in developed countries. The contradiction suggests the danger in generalizing CSR–stakeholder research findings in developed countries to emerging economies.

Details

Social Responsibility Journal, vol. 12 no. 1
Type: Research Article
ISSN: 1747-1117

Keywords

Article
Publication date: 10 August 2015

Silvia Bellingkrodt and Carl Marcus Wallenburg

The purpose of this paper is to provide insights into commonalities and differences of service innovation across industries. The compared sectors are logistics service…

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Abstract

Purpose

The purpose of this paper is to provide insights into commonalities and differences of service innovation across industries. The compared sectors are logistics service providers and IT service providers (SPs).

Design/methodology/approach

Data were collected from 778 SPs via an online survey. Structural equation modelling was used to analyse the empirical data.

Findings

Both types of SPs benefit from close customer relations in terms of innovativeness and customer satisfaction. However, ITSPs rely more on a large number of customers to be innovative than logistics service providers (LSPs), further, LSPs can evoke a higher level of customer satisfaction when being innovative.

Research limitations/implications

Empirical data were collected in a single country (Germany) and at one point in time. A confirmation of the results in different service settings is therefore encouraged.

Practical implications

The results help managers with regard to their strategic decisions. The differentiating effects influencing innovativeness and customer satisfaction have been revealed.

Originality/value

The research is extended by developing a model based on the knowledge of service innovation, social exchange theory and industry characteristics and by empirically testing this model.

Details

The International Journal of Logistics Management, vol. 26 no. 2
Type: Research Article
ISSN: 0957-4093

Keywords

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