Environmental Uncertainty, Customer Concentration and Debt Financing Capacity

Customers are an important part of the supply chain, which have many aspects of the impact on the company’s production and operation activities, but in China, few studies focus on corporate debt financing capacity involving the supply chain—customer relationship. According to the empirical analysis based on China’s A-share manufacturing listed companies from 2014 to 2018, customer concentration can hugely improve corporate debt financing capacity, while this kind of significantly positive correlation exists only when environmental uncertainty is high. The results show that under the specific market conditions in China, large customers mean steady source of income and can provide strength certification for enterprises with their own reputation. From the bank's perspective, the positive effect on corporates’ value outweighs the potential operating risks and damage to benefits, so understanding the supply chain can help banks make better credit decisions. However, different companies face different market situations, and customer concentration has different effects on debt financing capacity.