Customer Concentration,Free Cash Flow And Performance Volatility

With the phenomenon of overcapacity and increasingly fierce market competition exists in China,the improvement of the relationship-based transaction becomes absolutely significant for the life of the firm.As the external stakeholders of the enterprise,the downstream customers will have an impact on the strategic decision-making and economic consequences of the enterprise,and in the era of the prevailing buyer’s market,the importance of major customers for the survival and development of the enterprise is more undoubted.However,the current research on customer concentration and its economic consequences mainly focuses on the impact of customers on corporate performance,the research on performance volatility is relatively lacking,this also makes the impact of customer concentration on the uncertainty faced by enterprises in the process of continuous operation more worthy of in-depth exploration.In addition,the previous research on the impact of free cash flow is mainly based on agency theory,this paper will try to explore whether the impact of free cash flow as redundant resources on enterprises is different in the complex relationship between enterprises and customers.Under such background,this paper will try to explore the relationship among customer concentration,free cash flow and performance volatility.Based on the sample data of Chinese A-share listed companies from 2009 to2018,this paper analyzes and empirically tests the impact of customer concentration on the internal vertical performance volatility and lateral dispersion,as well as the regulatory effect of free cash flow on their relationship;and this paper deeply explored how customer volatility will affect performance volatility and the moderating effect of free cash flow on its relationship.The results show that:customer concentration has a significant positive impact on performance volatility;the positive correlation between customer concentration and performance volatility will weaken with the increase of free cash flow;customer volatility has a significant positive impact on performance volatility;the positive correlation between customer volatility and performance volatility will weaken with the increase of free cash flow.Further research finds that earnings quality is a path for customer concentration to affect performance volatility;there are differences in the impact of customer concentration on performance volatility among enterprises with different marketpowers,and the positive impact of customer concentration on performance volatility is mainly reflected in enterprises with lower market powers;the regulatory effect of free cash flow is different in enterprises with different market powers.The conclusion of this paper expands the research of customer concentration and performance volatility,also provides a reference for enterprises to use customer resources reasonably and efficiently.