Investigating the Impacts of Concentration on Customer upon Capital Structure and Debt Maturity

Abstract

Objective: This research investigates the impacts of concentration on customer upon capital structure and debt maturity in the companies listed in the Tehran Stock Exchange, TSE. Method: To test the hypotheses of the research, multiple linear regression model has been used. To measure capital structure and debt maturity structure, we used financial leverage and long-term debt ratio, respectively, and to determine concentration on customer, we examined the three variables of the ratio of major sales (sales above 10 percent) to total sales, the Herfindahl-Hirschman Inex, and the dummy variable of existence or lack of major customer. The sample includes 140 companies in the TSE in the years 2011-2016, regarding the constraints of this study. Results: The evidence showed that there is a significant positive relationship between concentration on customer and capital structure. In other words, in the companies with major customers, the rate of financial leverage (debt) is higher the others. Also, in these companies the debt maturity structure is longer. Conclusion: The results imply the importance and effectiveness of company's major customers in increasing the capital structure (financial leverage) and the debt maturity structure.

Keywords

• customer concentration
• capital structure
• debt maturity structure