Customer Concentration, Corporate financialization and Investment Efficiency: Evidence of China

This study explores the impact of corporate financialization on the relationship between customer concentration and investment efficiency. Based on data from A-share listed companies in China from 2014 to 2022, we find that financialization effectively mitigates the negative impact of customer concentration on investment efficiency. Specifically, financialization reduces the risks associated with price fluctuations and delayed payments due to reliance on a few major customers. It also alleviates financing constraints and stabilizes fixed asset investments, thereby enhancing investment efficiency. Furthermore, this effect is more pronounced in non-state-owned enterprises, manufacturing firms, and firms adopting an analytical strategy. Additionally, in environments with lower institutional ownership and analyst coverage, the ”substitution effect” of financialization is more significant. To address endogeneity concerns, we employ IV, PSM, and alternative variable regressions, confirming the robustness of our findings. This study expands the research perspective on customer concentration and investment efficiency and provides valuable insights for financial policy formulation.