Customer concentration and stock price crash risk: new evidence from China

Using the sample of A-share listed companies from 2011 to 2022, we show a robust negative relationship between customer concentration and stock price crash risk in China. This finding contrasts with previous research based on U.S. firms, which shows that customer concentration is positively correlated with stock price crash risk. We believe that the Chinese imperfect capital market is the key factor contributing to this divergence. We reveal that a concentrated customer base can reduce stock price crash risk by improving corporate governance and supply chain transparency. Heterogeneity analysis shows that the effect is more pronounced for firms located in regions with low marketization level and those receiving less market attention.