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The Profitability and Pricing of Major Customers

Author

Listed:
  • Marty Gosman

    (Quinnipiac College)

  • Trish Kelly

    (Vanderbilt University)

  • Per Olsson

    (Duke University)

  • Terry Warfield

    (University of Wisconsin, Madison)

Abstract

We examine the profitability and valuation of retail firms identified by suppliers as major customers, using major customer relationships to proxy for unrecorded organizational-capital intangibles. Major customers have higher operating profitability and profitability persistence, with the sources of the higher profitability consistent with purported advantages of supply chain arrangements. The pricing of major customers is consistent with the market recognizing the level and over-time properties of operating profitability. Together, these results suggest that investors understand the profitability effects of unrecorded organizational intangible assets and that financial statement analysis can be used to further examine the valuation effects of such intangibles.

Suggested Citation

  • Marty Gosman & Trish Kelly & Per Olsson & Terry Warfield, 2004. "The Profitability and Pricing of Major Customers," Review of Accounting Studies, Springer, vol. 9(1), pages 117-139, March.
    • Handle: RePEc:spr:reaccs:v:9:y:2004:i:1:d:10.1023_b:rast.0000013631.48714.c1
    DOI: 10.1023/B:RAST.0000013631.48714.c1
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