How do investors view firm’s customer concentration through bank loan announcements? Evidence from China*

This study provides evidence on how investors evaluate the value of firms’ customer concentration. This study is the first study that divides the bank loan announcement data into approved loans and rejected loans to investigate investors’ reactions toward the bank loan announcements. We examine the relationship between the borrowing firm’s customer concentration and cumulative abnormal returns upon approved and rejected bank loan announcements for Chinese listed firms between 2002 and 2018. The effect of firm’s customer concentration on the abnormal returns is evaluated by OLS regression model controlled by some firm’s characteristics. The study finds that firms with higher customer concentration incur more negative cumulative abnormal returns upon rejected loan announcements but exhibit no significant difference upon approved loan announcements.