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Customer concentration and management earnings forecast

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  • Jianbo Song
  • Xin Wang

Abstract

Customers are one of the key external stakeholders for a company. Using Chinese listed companies’ data from 2007 to 2015, this paper examines the impact of customer concentration on information disclosure from the perspective of management earnings forecast. Empirical results show that a more concentrated customer base induces companies to disclose more positive earnings forecast. In addition, the positive association between customer concentration and management earnings forecast is more pronounced with higher economic policy uncertainty. Further analyses reveal that companies issue more positive earnings forecast to reduce the financing risk and protect their relationship-specific investment. Also, customer concentration reduces the consistency of earnings forecast since the deviation of the forecast performance and the actual performance is greater. This paper enriches the literature on the determinants of management earnings forecast and the effects of stakeholders on corporate financial behaviour. Our findings also provide implications for investors, regulators, and various stakeholders to understand management earnings forecast decisions.

Suggested Citation

  • Jianbo Song & Xin Wang, 2019. "Customer concentration and management earnings forecast," Economic and Political Studies, Taylor & Francis Journals, vol. 7(4), pages 454-479, October.
    • Handle: RePEc:taf:repsxx:v:7:y:2019:i:4:p:454-479
    DOI: 10.1080/20954816.2019.1667600
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    Citations

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    Cited by:

    1. Obaid Ur Rehman & Xiaoxing Liu & Kai Wu & Junfeng Li, 2023. "Customer concentration, leverage adjustments, and firm value," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(2), pages 2035-2079, June.
    2. Liu, Xiaofeng & Feng, Hua & Tian, Gaoliang & Zhang, Ting, 2024. "Environmental legal institutions and management earnings forecasts: Evidence from the establishment of environmental courts in China," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 545-573.
    3. Su, Kun & Zhao, Yan & Wang, Yinghui, 2024. "Customer concentration and corporate financialization: Evidence from non-financial firms in China," Research in International Business and Finance, Elsevier, vol. 68(C).
    4. Li, Min & Liu, Na & Kou, Aiju & Chen, Wenchuan, 2023. "Customer concentration and digital transformation," International Review of Financial Analysis, Elsevier, vol. 89(C).
    5. Lean Yu & Lihang Yu & Kaitao Yu, 2021. "A high-dimensionality-trait-driven learning paradigm for high dimensional credit classification," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-20, December.
    6. Cao, Feng & Zhang, Xueyan & Yuan, Rongli, 2022. "Do geographically nearby major customers mitigate suppliers’ stock price crash risk?," The British Accounting Review, Elsevier, vol. 54(6).

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