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Major Customers and Corporate Payout Flexibility

Author

Listed:
  • Hui Liang James

    (Soules College of Business, University of Texas at Tyler, 3900 University Blvd, Tyler, TX 75799, USA)

  • Bo Li

    (College of Business and Economics, California State University, Los Angeles, 5151 State University Dr., Los Angeles, CA 90032, USA)

  • Thanh Ngo

    (Department of Finance, College of Business, East Carolina University, 3127 Bate Building, Greenville, NC 27858, USA)

  • Hongxia Wang

    (Department of Finance and Economics, Coastal Carolina University, 100 Chanticleer Dr E, Conway, SC 29528, USA)

Abstract

Using a sample of 17,453 firm-year observations from 1993 to 2017, we find that firms with major customers maintain higher levels of payout flexibility. The positive impact of major customers on payout flexibility is contingent upon cash flow risk, stronger in firms with financial distress, higher cash flow volatility, lower customer switching costs, and greater R&D intensity. The results suggest that major customer-dependent firms tend to pursue more flexible payout policies to maintain or improve their financial flexibility. The results are robust to alternative measures of major customers, the inclusion of additional control variables, and various endogeneity tests.

Suggested Citation

  • Hui Liang James & Bo Li & Thanh Ngo & Hongxia Wang, 2022. "Major Customers and Corporate Payout Flexibility," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 12(02), pages 1-45, June.
    • Handle: RePEc:wsi:qjfxxx:v:12:y:2022:i:02:n:s2010139222500021
    DOI: 10.1142/S2010139222500021
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    Cited by:

    1. James, Hui L., 2023. "Social capital and the riskiness of trade credit," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).

    More about this item

    Keywords

    Financial flexibility; corporate payout; major customers; dividends; repurchase; payout flexibility;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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