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Article: The Effect of Major Customer Concentration on Firm Profitability: Competitive or Collaborative?
Title | The Effect of Major Customer Concentration on Firm Profitability: Competitive or Collaborative? |
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Authors | |
Keywords | Fundamental analysis Customer concentration Supply-chain competition Firm profitability Mergers and acquisitions |
Issue Date | 2018 |
Publisher | Springer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=1380-6653 |
Citation | Review of Accounting Studies, 2018, v. 24 n. 1, p. 189-229 How to Cite? |
Abstract | We test two potential hypotheses regarding the effects of major customer concentration on firm profitability. Under the collaboration hypothesis, customer power facilitates collaboration, and both the supplier firm and its major customers obtain benefits. Under the competition hypothesis, customer power results in rent extraction, and the major customers benefit at the expense of the supplier firm. We document that major customer concentration is negatively associated with the supplier firm’s profitability but positively associated with the major customers’ profitability. We demonstrate that these effects weaken as the supplier firm’s own power grows over its relationship with major customers, supporting the competition hypothesis. We carefully reconcile our results with prior studies’ findings that focus only on the supplier firm’s profitability and identify their research design and interpretation problems. We obtain similar inferences in a setting of major customers’ horizontal mergers and when we use an alternative measure of major customer power. |
Persistent Identifier | http://hdl.handle.net/10722/284500 |
ISSN | 2023 Impact Factor: 4.8 2023 SCImago Journal Rankings: 5.481 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Hui, KW | - |
dc.contributor.author | Liang, C | - |
dc.contributor.author | Yeung, PE | - |
dc.date.accessioned | 2020-08-07T08:58:32Z | - |
dc.date.available | 2020-08-07T08:58:32Z | - |
dc.date.issued | 2018 | - |
dc.identifier.citation | Review of Accounting Studies, 2018, v. 24 n. 1, p. 189-229 | - |
dc.identifier.issn | 1380-6653 | - |
dc.identifier.uri | http://hdl.handle.net/10722/284500 | - |
dc.description.abstract | We test two potential hypotheses regarding the effects of major customer concentration on firm profitability. Under the collaboration hypothesis, customer power facilitates collaboration, and both the supplier firm and its major customers obtain benefits. Under the competition hypothesis, customer power results in rent extraction, and the major customers benefit at the expense of the supplier firm. We document that major customer concentration is negatively associated with the supplier firm’s profitability but positively associated with the major customers’ profitability. We demonstrate that these effects weaken as the supplier firm’s own power grows over its relationship with major customers, supporting the competition hypothesis. We carefully reconcile our results with prior studies’ findings that focus only on the supplier firm’s profitability and identify their research design and interpretation problems. We obtain similar inferences in a setting of major customers’ horizontal mergers and when we use an alternative measure of major customer power. | - |
dc.language | eng | - |
dc.publisher | Springer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=1380-6653 | - |
dc.relation.ispartof | Review of Accounting Studies | - |
dc.rights | This is a post-peer-review, pre-copyedit version of an article published in Review of Accounting Studies. The final authenticated version is available online at: http://dx.doi.org/10.1007/s11142-018-9469-8 | - |
dc.subject | Fundamental analysis | - |
dc.subject | Customer concentration | - |
dc.subject | Supply-chain competition | - |
dc.subject | Firm profitability | - |
dc.subject | Mergers and acquisitions | - |
dc.title | The Effect of Major Customer Concentration on Firm Profitability: Competitive or Collaborative? | - |
dc.type | Article | - |
dc.identifier.email | Hui, KW: kaiwai@hku.hk | - |
dc.identifier.authority | Hui, KW=rp02238 | - |
dc.description.nature | postprint | - |
dc.identifier.doi | 10.1007/s11142-018-9469-8 | - |
dc.identifier.scopus | eid_2-s2.0-85054532474 | - |
dc.identifier.hkuros | 312332 | - |
dc.identifier.volume | 24 | - |
dc.identifier.issue | 1 | - |
dc.identifier.spage | 189 | - |
dc.identifier.epage | 229 | - |
dc.identifier.isi | WOS:000463917000006 | - |
dc.publisher.place | United States | - |
dc.identifier.issnl | 1380-6653 | - |