Customer concentration and company risk‐taking: Effective contract or managerial power?

Abstract This paper studies the relationship between customer concentration and company risk‐taking and its underlying application scopes. The results show that customer concentration is positively related to company risk‐taking. Additional analyses discuss the moderating effect of customer concentration on company risk‐taking from the perspectives of managers' characteristics and directors' characteristics. The view of effective contract is supported by all these results. This paper not only theoretically clarifies the underlying theoretical relationship between customer concentration and company risk‐taking but also provides empirical application situations for companies to design incentive contract and adjust risk‐taking level.