Abstract
We examine the association between customer concentration and capital structure adjustment speed using a sample of listed firms in the U.S from 1977 to 2019. We find that the customer-concentrated firms have a lower speed of leverage adjustment. The decomposition of customer types identifies corporate customers as the driving force. Moreover, customer concentration affects leverage adjustment speed mainly through increased cash flow volatility and asset specificity. The negative association is more pronounced in firms with high relationship-specific investments and low switching costs for their customers. Our findings highlight the vital role of customers as one of the key stakeholders in capital structure decisions.
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