Matthew Serfling is an assistant professor in the Finance Department of the Haslam College of Business. He has two papers forthcoming in top academic journals: the Journal of Accounting and Economics is considered a top journal in the field of accounting, and the Journal of Finance ranks among of the top three journals in the field of finance.
The Journal of Accounting and Economics paper is titled “Customer Concentration Risk and the Cost of Equity Capital.” This study investigates the relation between customer concentration and a supplier’s cost of equity capital. It hypothesizes that a more concentrated customer base increases a supplier’s risk, which results in a higher cost of equity. Overall, the findings suggest that the composition and concentration of a supplier’s customer base significantly impact its financing costs.
The Journal of Finance paper, titled “Firing Costs and Capital Structure Decisions,” examines the adoption of state-level labor protection laws as an increase in employee firing costs to examine how the costs associated with discharging workers affect capital structure decisions. It finds that firms reduce debt ratios following the adoption of these laws, and this result is stronger for firms that experience larger increases in firing costs. These results are consistent with higher firing costs crowding out financial leverage via increasing financial distress costs.