재무연구 제 권 호 (2022년 11월)
Asian Review of Financial Research, Vol., No..
pp.281~334
pp.281~334
Customer Concentration and Firm Risk : The Role of Outside Directors from Customers
Taeyeon Kim Assistant Professor of Finance, Department of Business Administration, The Catholic University of Korea
Hyun-Dong Kim Associate Professor of International Finance, Graduate School of International Studies, Sogang University
Kwangwoo Park Korea Advanced Institute of Science and Technology (KAIST)
This paper examines the role of customer-affiliated outside directors on suppliers in reducing risk arising from customer concentration. Using a sample of US suppliers over the 2001?2016 period, we find that a positive relationship between customer concentration and supplier firm risk is weakened with the presence of customers' representatives at suppliers' board. We further show that supplier firms with customer-affiliated outside directors are more likely to have less conservative financial policies. Our results suggest that customers' board membership at suppliers helps mitigate the customer concentration risk due to the tightened supplier?customer relationship and reduced information asymmetry.
Taeyeon Kim
Hyun-Dong Kim
Kwangwoo Park
This paper examines the role of customer-affiliated outside directors on suppliers in reducing risk arising from customer concentration. Using a sample of US suppliers over the 2001?2016 period, we find that a positive relationship between customer concentration and supplier firm risk is weakened with the presence of customers' representatives at suppliers' board. We further show that supplier firms with customer-affiliated outside directors are more likely to have less conservative financial policies. Our results suggest that customers' board membership at suppliers helps mitigate the customer concentration risk due to the tightened supplier?customer relationship and reduced information asymmetry.
