Research On The Relationship Between Customer Concentration And Corporate Cash Holdings

The company’s cash holding decisions are related to the company’s day-to-day operations and future development.A lack of cash holdings can lead to a liquidity crisis in the event of an external shock.When a company encounters an investment opportunity with a net present value greater than zero,the company may miss out due to a lack of cash,and cash-starved companies face high external financing costs.Companies that hold too much cash do not run into liquidity crises because they are short of cash,but they face high opportunity costs for holding too much cash.China is a relational society,customer concentration is an important feature of customer relationship and has an important influence on company operation.Customer concentration can improve the company’s sales performance and reduce the transaction cost,which brings benefits to the company.On the other hand,customer concentration will make the company depend on several major customers for sales.Increased customer dependence,unstable customer relationships and contagion effect of customer risk will increase the business risk of the company.Meanwhile,the predation of profit by the more bargaining customers will reduce the value of the company.Current research suggests that customer concentration affects a company’s cash holdings mainly through preventive motivation and commitment motivation.Precautionary Motivation believes that increased customer concentration will increase uncertainty about the company’s future operations and that the company will increase its cash holdings for precautionary purposes.The commitment motive is that the company is at a disadvantage in the game with customers.To maintain customer relationships,the company holds more cash to send a message to customers that the company is doing well.By increasing the level of cash held,the company promises customers that it can deliver goods on time.Therefore,based on the theories of cash holding and customer concentration,and the actual situation in China,this paper takes the data of A-share listed companies from 2009 to 2020 as a sample to establish a suitable model for empirical research on the relationship and mechanism of customer concentration and cash holding.The findings are as follows:(1)Basic regression indicates that increased customer concentration significantly increases a company’s cash holdings.(2)Group regression based on the nature of property rights shows that the positive correlation between cash holdings and customer concentration is not significant in state-owned enterprises,but in non-state-owned enterprises,the positive correlation between cash holdings and customer concentration is significant.(3)Intermediary effect test of the financing constraint shows that the financing constraint of the company is significantly positively related to the concentration of customers.(4)The intermediary effect on agency cost shows that agency conflict becomes more serious with the increase of customer concentration,and the increase of agency cost makes the company hold more cash.Agency cost acts as an intermediary in the process of customer concentration affecting the company’s cash holdings.(5)Further research has found that financing constraints and agency costs also play a role in regulating the level of cash held by companies as a result of customer concentration.These conclusions held after the robustness test.Based on the existing research,this paper makes a deep study on the mechanism of customer concentration affecting the company’s cash holding,theoretically analyzes the intermediary effect and adjustment effect of financing constraint and agency cost on customer concentration and company’s cash holding,and then tests the relevant hypothesis through empirical analysis to supplement the mechanism of customer concentration affecting the company’s cash holding.