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臺大管理論叢
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2
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Wasley, and Zach (2011) indicates that information externalities are likely to appear
between economically related firms and find that quarterly earnings announcements from
customers are positively related to suppliers’ market-adjusted returns. Pandit et al. (2011)
provides evidences of information transfers along customer-supplier relationship from the
view of capital market. Our study provides evidences of information transfers from the
perspective of cost structure and resource adjustments. Third, our study contributes to the
literature on the impact of customer concentration to supplier firms. Prior literature
provides two different views of customer concentration on cost stickiness: (1) bargain
power view which suggests that major customer has more power to pressure suppliers and
thus force suppliers to retain capacity and bear the costs of operating with unutilized
capacity when sales fall and (2) operations managements view which emphasizes that
major customers increase information sharing with supplier firms and help suppliers to
streamline production when sales decrease, reducing cost stickiness. Our empirical results
support the operations management view by showing that supplier’s costs are less sticky
when their customer bases are more concentrated. The results suggest that firms with
concentrated customer base adjust their costs timelier because the enhanced information
sharing along the supply chain provides supplier firms with more messages about future
demand. Finally, this study also validates the relevance of segment reporting requirement
(i.e., SFAS 131 Disclosures about Segments of an Enterprise and Related Information;
IFRS 8 Operating Segments) for financial statement analysis. Because costs are
fundamental determinants of earnings, understanding cost behaviors and the link between
cost and customer-base structure help investors and analysts with earnings forecasts and
stock valuation.
The remainder of this study is organized as follows. Section 2 provides literature
review on cost stickiness and customer-supplier relationship. Section 3 develops
hypothesis; Section 4 outlines the research design and sample selection. Section 5
documents the empirical findings and Section 6 discusses additional analyses. We
conclude in Section 7.
2. Literature Review
2.1 Cost Behaviors and Cost Stickiness
In the conventional model of cost behavior, costs are characterized as either fixed or
variable. Changes in variable costs are strictly proportional to the cost driver. However,
some studies investigate the complexity between costs and activities and find that most
overhead costs do not move proportionately to the activity levels (e.g., Noreen and