Customer Disclosure Research Articles

Proactive privacy practices in transition: Toward ubiquitous services

As the Internet paved the way for electronic businesses, ubiquitous services (u-services) will be the next wave launched by electronic services based on current customer information potential. However, privacy is a strategic issue and has been identified as a key hindrance to u-services. As a proactive approach and drawing upon integrative social contracts theory, this study presents a proactive privacy practices framework to examine how the interplays within electronic service, providers’ proactive approaches influence customer disclosure willingness for future u-services, adoption. The results and implications of this study are discussed and expected to shed light on privacy practices.

The role of server–patron mutual disclosure in the formation of rapport with and revisit intentions of patrons at full-service restaurants: The moderating roles of marital status and educational level

The purposes of this study are (1) to determine the specific server attributes that have the strongest influences on server–patron mutual disclosure; (2) to examine the causal relationships between server–patron mutual disclosures and rapport with and revisit intentions of patrons; and (3) to investigate the moderating roles of marital status and educational level in the process. Theoretical relationships between server attributes, mutual disclosure, rapport, and patrons’ revisit intentions were derived based on a literature review. Following the collection and analysis of data obtained from full-service restaurant patrons, this study found that three server attributes directly influence two sub-dimensions of mutual disclosure (server disclosure and customer disclosure). Furthermore, mutual disclosure was shown to have a positive impact on rapport, which results in patron revisit intentions. This study also found that marital status and educational level have key moderating functions in the relationship between mutual disclosure and rapport. The possible interpretations and managerial implications of these findings are provided.

Investor valuations of suppliers' major customer disclosures

I investigate whether or not investors in suppliers to retailers find the major customer disclosure value-relevant. Major customer retailers have buyer power because the retailer represents a significant portion of a supplier's sales. Buyer power can indicate reliance on one customer where the supplier is at a disadvantage in negotiating transaction terms. Alternatively, the existence of major customers may suggest the supplier is in a mutually-benefiting partnership with the retailer. I hypothesize that investors find the major customer disclosure value-relevant; however, the direction depends on whether the investor focuses on the partnership aspect or sales concentrated with one customer. My valuation results are consistent with investors focusing on the sales concentration for larger suppliers (higher risk) and the mutually benefiting partnership for smaller suppliers (lower risk). The findings provide insight on valuation implications of having and disclosing a major customer.

Concentrated supply chain membership and financial performance: Chain- and firm-level perspectives

This study reports evidence that concentrated 3-firm supply chains achieve superior financial performance, and that supply chains’ financial performance varies systematically with measures of chain concentration and chain duration. Results from firm-level analyses suggest that the profitability benefits of supply chain relationships are captured predominantly by downstream chain members, whereas cash cycle benefits are realized throughout the supply chain. Firm-level tests also reveal that chain members’ financial performance varies systematically with measures of downstream bargaining power, downstream relationship duration, and degree of supply consolidation. The study's chain- and firm-level analyses employ data extracted from sample firms’ publicly available financial reports, including their major customer disclosures under Statement of Financial Accounting Standards Nos. 131 (1997) and 14 (1976).

Effects of the Existence and Identity of Major Customers on Supplier Profitability: Is Wal-Mart Different?

ABSTRACT: We investigate how buyer power in the retail market affects suppliers' profitability. Buyer power exists when suppliers depend on a concentrated set of retailers. Further, Wal-Mart, the world's largest retailer, possesses additional buyer power because it has a dominant position in many product supply chains, advanced inventory management practices, and cutting edge technology. We form a sample of firms that supply retailers and utilize the major customer disclosure (SFAS No. 131) to proxy for dependence on major customers and the incremental Wal-Mart effect associated with buyer power. We find that as sales to major customers increase, supplier gross margins and return on assets decrease while their inventory and payables management improves. Wal-Mart is incrementally associated with increasing gross margins, improving cash collections, and extended payment terms with its vendors. Supplier power offsets some of the adverse effects. Our findings provide insight on financial implications of supply-chain dynamics where (1) one firm has an economic dependence upon a major customer, and (2) the major customer is a leading channel member.

The Effects of Wal-Mart on the Profitability and Investor Valuation of its Suppliers

The U.S. retail market exhibits increasing buyer concentration among larger retailers. As a result, the increasing clout may enable larger retailers to dictate terms from their suppliers. We utilize the major customer disclosure (SFAS 131) and focus on 150 suppliers who identify Wal-Mart as a major customer. We find that supplier gross margins increase, while return on assets deteriorates. Days' sales in inventory lengthened as expected; however, the effect was offset by an increase in days' purchases in accounts payable. We also observe negative valuation implications separate from the effects of lower earnings that are consistent with greater risk for suppliers from their Wal-Mart relationship. Supplier power mitigates some of the negative effects. The findings provide insight on financial and valuation implications of supply chain dynamics where one firm has an economic dependence upon a major customer.

Customer disclosures, impression management and the construction of legitimacy

PurposeThis paper aims to explore how organizations use annual reporting for legitimacy purposes in the context of the ten recently privatised regional water companies in the UK. Although privatization required the water plcs to establish a distinctly different organizational legitimacy for themselves as customer‐focused companies commensurate with their new private sector status, it was clear from the nature of their privatization that they would experience difficulties in achieving this. Privatization did little to change their previous monopoly character, and this created discrepancy with the model of private sector companies operating in customer‐led competitive markets.Design/methodology/approachThe paper uses a content analysis of statements concerning customer service in annual reports. The analysis examines the variety of ways in which the ten water plcs deployed both assertive and defensive impression management techniques in their attempts to gain, maintain and repair their legitimacy as customer‐focused companies.FindingsThe analysis emphasises the importance of the role of corporate reporting as a resource in legitimacy management. The paper also argues that, despite sustained efforts, the water plcs did not wholly succeed in persuading all their customers that the privatization of water was “a good thing”.Originality/valueThe paper will be valuable to researchers and practitioners alike, as it attempts to take further one's understanding of how organizations use corporate reporting for legitimacy purposes by examining a much more extreme case of the legitimacy problem than has been previously considered in the literature: namely, the need for an entirely new basis for corporate legitimacy.

Better than best execution? The Financial Services Authority’s new proposals to reform UK best execution requirements

The Financial Services Authority’s (FSA) proposals to revise best execution obligations will involve an extensive departure from existing practices. In particular, achieving the ‘best price’ will no longer be paramount. Firms will have to factor into the best execution equation other direct and indirect costs of trading which are relevant to achieving ‘the best outcome’ or ‘quality of execution’ for the consumer. This will make the assessment far more complex. The existing timely execution rule, making immediacy of execution the benchmark, is likely to be scrapped, to be replaced by an obligation to deal at a time best calculated to deliver the desired result for the customer. The existing SETS ‘safe harbour’ may also be removed and there will be extensive new customer disclosure obligations in relation to firms’ execution policies and procedures, including information as to deal flow through potential individual execution venues, and execution specific disclosures of conflicts of interest. Firms will also be obliged to review at least annually their execution arrangements and make changes if in the interests of their customers, and the FSA proposes rigorous transaction monitoring obligations to ensure that the revised best execution requirements are being met in practice.