Customer Concentration and Public Disclosure

• In Event: Customers and Disclosure

Abstract

This study examines the effect of customer base concentration on corporate public disclosure policy. We argue that a more concentrated customer base reduces the supplier firm’s costs of private communication with its customers and predict a negative association between customer concentration and the amount of public disclosure. Consistent with this prediction, we find that the likelihood and frequency of management earnings forecasts decrease with customer concentration for firms with major corporate customers. This effect is stronger when the supplier and customers are engaged in more relationship specific investments, and when the customer switching costs are lower. We find a similar association between the concentration of industry customer base and the likelihood and frequency of management earnings forecasts.

Authors

• Steven Crawford, University of Houston-Houston

• Ying Huang, University of Texas at Austin

• Ningzhong Li, University of Texas-Dallas

• Ziyun Yang, University of Houston-Victoria