IDEAS home Printed from https://ideas.repec.org/a/wly/ijfiec/v25y2020i1p90-119.html
   My bibliography  Save this article

Customer concentration, institutions, and corporate bond contracts

Author

Listed:
  • Chenyan Liu
  • Zuoping Xiao
  • Hong Xie

Abstract

We examine the effect of customer concentration, the quality of institutions, and their interaction on corporate bond contract terms in China. We find that higher customer concentration is associated with higher bond spreads, shorter bond maturity, and more bond covenants. In contrast, better institutions are associated with lower bond spreads, longer bond maturity, and fewer bond covenants. Moreover, we find that the adverse or unfavourable association between customer concentration and bond contract terms is weakened for firms operating within better institutions or for firms whose ultimate owners are the Central Government of China. Furthermore, the adverse association between customer concentration and bond contract terms is more pronounced when a supplier's major customers have lower switching costs or when the supplier has made more relationship‐specific investments. Finally, our main results are robust to controls for endogeneity concerns and other sensitivity checks. Overall, our findings suggest that bondholders view customer concentration as a risk factor but better institutions as a protection.

Suggested Citation

  • Chenyan Liu & Zuoping Xiao & Hong Xie, 2020. "Customer concentration, institutions, and corporate bond contracts," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 25(1), pages 90-119, January.
    • Handle: RePEc:wly:ijfiec:v:25:y:2020:i:1:p:90-119
    DOI: 10.1002/ijfe.1731
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/ijfe.1731
    Download Restriction: no
    File URL: https://libkey.io/10.1002/ijfe.1731?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Guo, Hongling & Sun, Yue & Qiu, Xuemei, 2021. "Cross-shareholding network and corporate bond financing cost in China," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    2. Han-Ting Wang & Sze-Ting Chen, 2020. "The Impact of CEO Competence Heterogeneity and Investor Risk Appetite on Corporate Bond Yield- Take the Listed Companies of the Real Estate Industry as an Example," International Journal of Business and Administrative Studies, Professor Dr. Bahaudin G. Mujtaba, vol. 6(4), pages 183-200.
    3. Zhanguang Chen & Qiaowan Wang & Chao Dou & Tian Liang, 2020. "Government Background Customers and Private Enterprise Innovation from the Perspective of Supply Chain Risk Transmission," Sustainability, MDPI, vol. 12(8), pages 1-22, April.
    4. Wang, Lu & Su, Zhong-qin & Fung, Hung-Gay & Jin, Hong-min & Xiao, Zuoping, 2021. "Do CEOs with academic experience add value to firms? Evidence on bank loans from Chinese firms," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    5. Jamal A. Al‐Khasawneh & Paul Dion & Naceur Essaddam & Tashfeen Hussain, 2023. "Is the cost of equity a mere function of leverage? The case of bond IPOs," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 58-78, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:ijfiec:v:25:y:2020:i:1:p:90-119. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/1076-9307/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.