We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Customer-Base Concentration, Investment, and Profitability: The U.S. Government as a Major Customer.
- Authors
Cohen, Daniel A.; Li, Bin
- Abstract
We examine whether customer-base concentration has a differential impact on profitability for firms contracting with major government customers versus firms contracting with major corporate customers. We document that firm profitability increases with the concentration of major government customers, but decreases with the concentration of major corporate customers. We attribute the contrasting results to the differential impact of major government and corporate customers on demand uncertainty. Specifically, firms contracting with major government customers face lower demand uncertainty that enables them to realize more efficiency gains from customer-specific investments, whereas firms contracting with major corporate customers are exposed to higher demand uncertainty that reduces the efficiency of customer-specific investments. Overall, our study suggests that major government customers are unique and important in the composition of customer base, and they impact firm outcomes in a significantly different way than major corporate customers. JEL Classifications: M41; L25; G14; H57.
- Subjects
UNITED States; ATTENTION; PROFITABILITY; INVESTMENT management; INDUSTRIAL policy
- Publication
Accounting Review, 2020, Vol 95, Issue 1, p101
- ISSN
0001-4826
- Publication type
Article
- DOI
10.2308/accr-52490