Does the risk of major customer need to be balanced? The role of customer concentration in corporate governance

• Published in: PloS one Vol. 16; no. 11; p. e0259689
• Main Authors: Gao, Di, Ma, Jiangming, Wang, Yiru
• Format: Journal Article
• Language: English
• Published: United States Public Library of Science 09.11.2021; Public Library of Science (PLoS)
• Subjects: Behavior; Biology and Life Sciences; Capital expenditures; China; Commerce; Consumer Behavior; Corporate governance; Credit risk; Customer satisfaction; Customers; Decision Making; Economic aspects; Emerging markets; Humans; Hypotheses; Information sharing; Institutional investments; Investment policy; Investment strategy; People and Places; Policies; Profits; Risk taking; Social Sciences; Suppliers; Supply chains; Sustainable development; China
• ISSN: 1932-6203; 1932-6203
• DOI: 10.1371/journal.pone.0259689

In the operation and management of the company, major customers may affect a supplier firm's level of governance. The goal of our study is investigating whether a major customer acts as an important role in corporate governance in emerging markets and exposing the mechanism that how major customers affect corporate decision-making. There is a growing body of literature involving studies about the effect of customer concentration on firm performance of western countries. Few studies have recognized to what degree does customer concentration satisfy the sustainable development of supplier firm. Using a sample of Chinese listed firms, we found a nonlinear relationship between customer concentration and risk-taking, corporate policies and firm performance. Evidence shows that the effect of customer concentration in China resembles an inverted U-shaped curve and major customers are crucial in financial and investment policies. Our results help to provide a broader perspective on the role of major customers, giving a deep explanation about the role of customer concentration in corporate governance.