Customer Concentration and Leverage Adjustment Speed: The Mediating Role of Cash Flow Volatility

Document Type : Research Paper

Authors

1 Mohammad Omid Akhgar: Associate Professor of Accounting Department, Faculty of Humanities and Social Sciences, University of Kurdistan, Sanandaj, Iran

2 Shadi Hasanzadeh: Assistant Professor, Department of Accounting, Faculty of Humanities and Social Sciences, University of Kurdistan, Sanandaj, Iran

3 Mahnaz Kheirandish: Master of Accounting, Faculty of Humanities and Social Sciences, University of Kurdistan, Sanandaj, Iran

Abstract

Leverage adjustments have attracted much attention from the academic community and studies in recent decades. One of the factors affecting the adjustment of the company's leverage is customer concentration. Major customers are among the vital stakeholders and the primary source of income of the companies, which play a vital role in the profitability and strategic decisions of the company. The purpose of this study is to investigate the relationship between customer and leverage adjustment speed and the mediating role of cash flow volatility in this relationship. In order to test and analyze the hypotheses, the panel data of 113 companies are members of the stock exchange from 2010 to 2024 and GLS multiple regression were used. The findings of the study showed that customer Concentration has a positive and significant effect on the speed of lever adjustment and cash flow volatility can play a mediating role in the relationship between customer Concentration and the speed of leverage adjustment speed. In companies with high customer Concentration due to customer retention and company value, leverage adjustment leads to better company reputation and reaching optimal leverage. According to the results of this study, cash flow volatility have a significant mediating role in the relationship between customer Concentration and leverage adjustment speed and customer Concentration affects the leverage adjustment speed by increasing cash flow volatile. Companies and investors can pay special attention to the effect of customer Concentration on capital structure, factors determining the speed of leverage adjustment .

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History

  • Receive Date: 06 April 2024
  • Revise Date: 03 January 2025
  • Accept Date: 20 January 2025

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