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Does customer concentration affect corporate risk-taking? Evidence from China

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  • Cao, Xiyang
  • Ni, Jian
  • Wang, Fei
  • Xu, Yue

Abstract

This paper investigates the impact of customer concentration on corporate risk-taking in China. Our analysis shows that customer concentration increases major customers' bargaining power, allowing them to transfer some of their risk to upstream firms, resulting in upstream firms' passive risk-taking. Due to their relatively weak bargaining position, firms with a concentrated customer base are forced to maintain high levels of inventories and receivables. Unlike previous research, which has frequently emphasized the positive aspects of risk-taking, our findings highlight the negative aspects of risk-taking caused by customer concentration as a result of supply chain interactions.

Suggested Citation

  • Cao, Xiyang & Ni, Jian & Wang, Fei & Xu, Yue, 2023. "Does customer concentration affect corporate risk-taking? Evidence from China," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323006694
    DOI: 10.1016/j.frl.2023.104297
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    Cited by:

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    2. Tang, Mengxuan & Hou, Yang (Greg) & Goodell, John W. & Hu, Yang, 2024. "Fintech and corporate risk-taking: Evidence from China," Finance Research Letters, Elsevier, vol. 64(C).

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