Abstract
This paper empirically investigates the effect of proprietary costs on firms’ choices regarding the disclosure of major customer information in China. We document widespread variation in firms’ choices regarding the disclosure of the identities of their top five customers. Firms with high proprietary costs are more likely to conceal the identities of their top five customers. Specifically, firms with higher advertising expenditure and higher research and development (R&D) expenditure and firms operating in industries with intense product market competition tend to conceal the identities of their major customers. Considering the unique institutional environment in China, we further find that among politically connected firms, non-SOEs have a greater tendency to conceal the identities of their top five customers than SOEs. In addition, after controlling for the financing benefits gained from disclosing the identities of top five customers, our results do not change. Taken together, the results of this paper suggest that proprietary costs are an important factor in firms’ choices regarding the disclosure of information about major customers in China.
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* We acknowledge the support given by the National Natural Science Foundation of China (No. 71372042 and No. 71372041) and the MOE Project for Key Research Institutes of Humanities and Social Science in Universities (No. 13JJD790019). We appreciate the helpful comments of Professor Nancy Su (the executive editor) and two anonymous reviewers. Any remaining errors are our own.
1 Corresponding author: Song Tang, PhD, Associate Professor, School of Accountancy/Institute of Accounting and Finance, Shanghai University of Finance and Economics; E-mail: tangsong@mail.shufe.edu.cn. Kaigang He, PhD candidate, School of Accountancy, Shanghai University of Finance and Economics. Jie Xu: MPAcc, Shanghai office, KPMG China.
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Tang, S., He, K. & Xu, J. Proprietary Costs and the Disclosure of Information about Major Customers: Evidence from Chinese Listed Firms. China Account Financ Rev 17, 6 (2015). https://doi.org/10.7603/s40570-015-0006-x
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DOI: https://doi.org/10.7603/s40570-015-0006-x