Major Customer Reliance and <scp>SG</scp>&A Cost Sensitivity
ABSTRACT This paper examines the impact of major customer reliance on the sensitivity of selling, general and administrative (SG&A) costs in response to sales fluctuations. Utilising an expanded cost sensitivity model and conducting a thorough analysis of US‐listed firms, we uncover that supplier firms with a higher degree of dependence on major customers demonstrate a notably decreased sensitivity of SG&A costs to both increases and decreases in sales. Furthermore, our analysis reveals that the negative association between major customer reliance and SG&A cost sensitivity is significantly influenced by factors such as industry characteristics, relationship‐specific investments and customer types. Finally, our insights into SG&A costs can be extended to encompass total costs and operating costs, offering valuable insights into broader cost management dynamics and strategies.
Authors
- Ci Zhang
- Zhijun Lin (ORCID: https://orcid.org/0000-0002-9077-344X)
- Di Fan (ORCID: https://orcid.org/0000-0002-1529-9098)
- Haomin Zhang (ORCID: https://orcid.org/0000-0003-1875-0910)
Institutions
- Hong Kong Polytechnic University (HK)
- Shenzhen University (CN)
- North China University of Water Resources and Electric Power (CN)
Publication Details
- Journal
- Accounting and Finance
- Published
- 2025-02-28
- DOI
- https://doi.org/10.1111/acfi.70008
- Primary Topic
- Auditing, Earnings Management, Governance
- Type
- article
- Field-Weighted Citation Impact
- 0.00
Funders
- Shenzhen University