Customer Concentration,Financing Needs And Earnings Management

As an important means for enterprise to fasify the financial index,earnings management is brought to the forefront in the supply chain.Client base is an important segment to the downstream supply chain and performs two different functions:financial distress and corporate governance.Higher bargaining power of the customer makes company sell products at a lower price and higher credit sales,which further reduce profit and increase financial risk.Enterprises rely on important clients often manipulate accounting earnings in order to deliver financing institutions generally upbeat message to seek finance.This will help them keep customer sources and reduce operational risks.The main innovation of this paper is to study the relationship between customer concentration and earnings management,and to group return in the case of different property rights,and then introduce financing demand,multiply it as a regulatory variable and customer concentration,and study the transfer term and Research on the relevance of earnings management.We research how customer concentration influences earnings management based on transaction cost theory,information asymmetry,stakeholder theory and contract theory.We take Shanghai and Shenzhen A-share listed firms between 2013 and 2017 as samples and use methods such as descriptive statistics analysis,correlation analysis and multiple regression analysis.We also introduce the financing demand as regulating variable to study how it influences the correlation.Finally,we replace customer concentration with top one customer sales to further verify the main hypothesis of the article.For enterprises with high customer concentration price of losing customers will exceeds the cost of earnings management.Therefore,they are more likely to manipulate data in order to convey good information to their customers and maintain their contracts.We measure earnings management with the absolute value of controllable emergency profit in this paper and customer concentration is measured by the ratio between top-five customers sales and total sales.Hypothesis 1 is used to test the positive correlation between customer concentration and earnings management.Multiple linear regression and Pearson correlation analysis areconducted based on data from all a-share companies(all the data are from CESMAR database),and the hypothesis is verified by the data.State-owned enterprises have more advantages than non-state-owned enterprises in terms of both financing and enjoying the preferential policies and subsidies.Therefore,non-state-owned enterprises need stable source of customers to guarantee their normal business activities.In this context hypothesis 2 proposes that the positive correlation between customer concentration and earnings management ia more significant in non-state-owned enterprises than in state-owned enterprises.And this hypothesis can be verify by multiple regression analysis of state-owned enterprise's data and non-state-owned enterprise's data.Enterprises raise funds from other institutions or individuals to meet the needs operating capital turnover,paying off matured debts or developing new projects.This is called financing demand,which is aim at the survival and development of enterprise.Financing demand can be further divided into equity financing needs and debt financing needs according to the channel of raising funds.The financial operational risk will increase with a higher customer concentration.Enterprises often manage their earnings when they need to disclose financial indexes to achieve the financing purpose.Thus,it can be concluded that there exist a more positive correlation between customer concentration and earnings management when enterprises have a higher financing demand.On the basis of hypothesis 1and 2,multiple regression is carried out on hypothesis 3 can be tested.To sum up,it can be concluded that a high customer concentration will result a higher degree of earnings management,and this correlation is more significant in non-state-owned enterprises.Financing demand has a significant impact on business activities.Financing demand has a significant impact on business operations.The research's financing needs are multiplied by customer concentration as a positive correlation between the transfer term and the sample company's earnings management is partly verified.