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Corporate customer concentration and stock price crash risk

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  • Ma, Xiaofang
  • Wang, Wenming
  • Wu, Jiangang
  • Zhang, Wenlan

Abstract

Using a large sample of U.S. firms, we find that major corporate customer concentration is positively associated with a firm's future stock price crash risk. This positive relation is more pronounced when the supplier firms have made a higher level of relationship-specific investments, have a poorer information environment, and/or face lower customer switching costs. Our evidence suggests that exposure to an undiversified corporate customer base can have a negative bearing on a firm's crash risk.

Suggested Citation

  • Ma, Xiaofang & Wang, Wenming & Wu, Jiangang & Zhang, Wenlan, 2020. "Corporate customer concentration and stock price crash risk," Journal of Banking & Finance, Elsevier, vol. 119(C).
    • Handle: RePEc:eee:jbfina:v:119:y:2020:i:c:s0378426620301692
    DOI: 10.1016/j.jbankfin.2020.105903
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    More about this item

    Keywords

    Crash risk; Corporate customer concentration; Relationship-specific investments; Customer switching costs; Information environment;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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