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exclude observations which SG&A costs are missing, we do not require that all cost
variables to be jointly available but only those that are required in each test. The average
(median) firm in our sample reported sales revenue of $834 ($91) million dollars of sales,
$151 ($20) million dollars of selling, general and administrative costs. Note that the mean
(median) value of
CC
, variable that measures cost concentration, is 0.104 (0.051) in our
sample, and interquartile range is from 0.017 to 0.131. This shows significant variation in
customer-based concentration among supplier firms in our sample. The mean and median
of
CC
is similar to that in Patatoukas (2012) and Chang et al. (2015).
Table 1 Descriptive Statistics
Variable
N
Mean
Std. Dev.
Q1
Median
Q3
SALE
47,452 834.0031 2395.7024 20.2625
90.6185 450.7840
OC
47,452 700.7037 1968.5846 20.3945
82.7415 391.1820
SGA
47,452 150.6157
439.0183
5.5400
20.3060
80.6670
COGS
47,452 527.4510 1502.6128 11.9610
55.1570 280.2820
EMP
47,452
4.3292
16.0825
0.1420
0.5540
2.5000
CC
47,452
0.1043
0.1440
0.0169
0.0507
0.1308
SIZE
47,452
4.5701
2.2294
3.0088
4.5067
6.1110
RD
47,452
0.0643
0.1683
0
0.0195
0.0807
FCF
38,795
5
-0.0156
0.7321 -0.0266
0.0525
0.1079
ASINT
47,452
1.4181
35.4726
0.6399
0.8743
1.2924
EMPINT
47,452
0.0089
0.0113
0.0037
0.0064
0.0110
Table 2 present correlations among variables used in my test. Pearson (Spearman)
correlation is reported in the upper (lower) part of the table. Sale is highly positively
correlated with selected cost variables (
SGA, COGS,
and
OC
), which indicates that using
sales as cost driver is appropriate. Note that
Size
is negatively correlated with
CC
, which
can be explained that smaller firms have more concentrated customer bases.
5 Free Cash Flows (
FCF
) is measured as cash flow from operating activities minus common and
preferred dividends, scaled by total assets. As the cash flow from operating activities (Compustat item
OANCF) is available on Compustat only since 1988, thus some firm-year observations are missing.