Customer Concentration and Public Disclosure: Evidence from Management Earnings and Sales Forecasts

54 Pages Posted: 19 May 2016 Last revised: 11 Apr 2019

See all articles by Steve Crawford

Steve Crawford

University of Houston

Ying Huang

University of Texas at Dallas

Ningzhong Li

University of Texas at Dallas

Ziyun (Calvin) Yang

University of Houston

Multiple version iconThere are 2 versions of this paper

Date Written: April 9, 2019

Abstract

This study examines the association between customer base concentration and corporate public disclosure policy. When the customer base is more concentrated, large customers face lower costs of accessing the supplier firm’s private information, reducing customers’ overall demand for the supplier’s public information, suggesting a negative association between customer concentration and the amount of public disclosure. Alternatively, large customers have greater bargaining power and may demand the supplier firm provide more public disclosures. Consistent with customer concentration facilitating private information flow from the supplier to customers, we find that the frequencies of management earnings and sales forecasts are negatively associated with customer concentration among firms with major corporate customers. These association are stronger when the supplier and customers are engaged in more relationship-specific investments, when customers’ private information acquisition costs are lower, and when it is less costly for customers to find another supplier.

Keywords: customer base concentration; major customers; public disclosure; management forecasts; relationship-specific investments

JEL Classification: M41

Suggested Citation

Crawford, Steve and Huang, Ying and Li, Ningzhong and Yang, Ziyun, Customer Concentration and Public Disclosure: Evidence from Management Earnings and Sales Forecasts (April 9, 2019). Available at SSRN: https://ssrn.com/abstract=2781627 or http://dx.doi.org/10.2139/ssrn.2781627

Steve Crawford (Contact Author)

University of Houston ( email )

4800 Calhoun Road
Houston, TX 77204
United States

Ying Huang

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Ningzhong Li

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Ziyun Yang

University of Houston ( email )

4800 Calhoun Road
Houston, TX 77204
United States

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