Effect of Customer Concentration on Managers Compensation of listed companies in Tehran Stock Exchange

Document Type : Research Paper

Authors

1 Ph.D Student in Accounting, Eslamic Azad University of Ghaenat unit, Iran

2 Associate Professor in Accounting, Ferdowsi University of Mashhad, Iran

Abstract

Companies to centralized customer have higher business risks, because a major customer loss could result in a significant reduction in the cash flow of the suppliers. Hence, managers request higher Compensation to cover this probable risk. Also, customer concentration allows managers to kind of bargaining, which can increase their cash Compensation. The main purpose of this research is to investigate the effect of customer concentration on the managers' compensation in listed companies at Tehran Stock Exchange. Multiple linear regression model has been used to test hypothesis based on combined data. Normal logarithm of cash compensation and three indicators including, major sales ratios (sales above 10%) to total sales, the Herfindahl-Hirshman index and the index of the presence or absence of a major customer in the company were used for measuring of managers' compensation amount and customer concentration respectively. The statistical population of this research included 140 companies selected by screening during the 2009-2016 period in Tehran Stock Exchange. The research evidence showed that customer concentration has a positive and significant effect on managers' compensation. In other words, in companies that concentration on a major customer is existed, managers' cash compensation are higher.

Keywords

Main Subjects

References

Adimo, M., Vinfered, J. (2015). When does the market matter? Stock prices and the investment of equity-dependent firms. Q. J. Econ. 118, 969–1005.
Ahmadpour, A., Hajiha, Z., Chenari Bouket, H. (2017). Disclosure Quality and Management Bonus, Empirical Accounting Research, 23 (4), pp. 61-43 (In Persian).
Banerjee, S., Dasgupta, S. , Kim, Y. (2008). Buyer-supplier relationships and the stake- holder theory of capital structure. Journal of Finance 63, 2507–2552.
Banimahd, B., Moradzadehfar, M., Velikhani, M.J. (2014). Accounting Conservatism and Management Bonus, Management Accounting, No. 22, pp. 43-21 (In Persian).
Bei., L., Xu., ZH. (2017). CUSTOMER CONCENTRATION AND CORPORATE PAYOUTS, Proceedings of the ASBBS 24th Annual Conference.
Berrios, R., (2006). Government contracts and contractor behavior. Journal of Business Ethics 63, 119-130.
Campell, M., Gao, J., (2014). Customer concentration and loan contract terms. Working Paper. Cornell University.
Cohen, D.A. , Li, B. , (2013). Why do Firms Hold Less Cash? The University of Texas at Dallas Working paper.
Conyon, M. J., He, L. (2016). Executive Compensation and Corporate Fraud in China, Journal of Business Ethics, Volume 134, Issue 4, pp 669–691.
Dhaliwal, D. , Judd, J.S. , Serfling, M.A. , Shaikh, S.A. (2016). Customer concentration risk and the cost of equity capital. Journal of Accounting and Economics 61 (1), 23–48.
Dhaliwal, D. , Michas, P.N. , Naiker, V. , Sharma, D. (2014). Major Customer Reliance and Auditor Going-Concern Decisions. University of Arizona Working Paper.
Huang, H., Lobo, G., Wang, C., Xie, H. (2016). Customer concentration and corporate tax avoidance, Journal of Banking and Finance 72 (4), 184–200.
Hui, K. W., Klasa, S., Yeung, P. E. (2012). Corporate suppliers and customers and accounting conservatism. Journal of Accounting and Economics, 53: 115-135.
Irvine, P., Park, S.S., Yildizhan, C. (2013). Customer-base concentration, profitability and distress across the corporate life cycle.
Javadi, N., Fatahi, S. (2016). Investigating the Effect of Directors' Rewards on Capital Structure and Financial Performance of Tehran Stock Exchange Companies, Financial Management Strategy, No. 14, pp. 69-94 (In Persian).
Kalwani, M. U., Narayandas, N. (2005). Long-term manufacturer-supplier relationships: Do they pay off for supplier firms?, Journal of Marketing 59: 1-16.
Khanmohammadi, S. (2016). Investigating the effect of customer focus on tax avoidance and risk in listed companies in Tehran Stock Exchange, Master thesis, Islamic Azad University, Tehran Research Scientist Branch (In Persian).
Kim, R., Luo, W. (2016). Customer concentration and earnings management: Evidence from the Sarbanes–Oxley Act, Electronic copy available at: https://ssrn.com/abstract=2970368.
Kordestani, GH., Abbasi, A. (2014). Investigating the Effect of Customer concentration on Financial Performance of the Company, Asset Management and Financing, No. 3, pp. 81-92 (In Persian).
Nicomaram, Hashem., Pazoki, P. (2015). Management Revenue and Profitability Sustainability, Management Accounting, No. 24, pp. 61-71.
Rahmani, S., Gholami Jamkarani, R. (2016). Concentration on Customer and Corporate Performance, Management Accounting, No. 31, pp. 9-81(In Persian).
Ravenscraft, D. (2004). Structure-profit relationships at the line of business and in- dustry level. Review of Economics and Statistics 65, 22–31.
 

Files

History

  • Receive Date: 25 May 2018
  • Revise Date: 16 January 2019
  • Accept Date: 11 September 2018

Share

How to cite

Statistics