Abstract: This study investigates how customer structure influences the market discount of private placement in China’ s listed firms. Using the information hand-collected from top 5 customers of A-share listed companies that conducted private placement during 2010-2016, we find that the higher the customer concentration, the greater the market discount rate of private placement. The positive relationship between customer concentration and market discount rate is strong when the raised capital is used for external expansion and weak when the quality of customers is at a high level. Further analysis based on event study finds that the higher the customer concentration, the lower the cumulative abnormal return when the shares of private placement are listed, and this effect mainly exists in the sample companies that conduct private placement for external expansion. Overall, we conclude that customer concentration increases the uncertainty about firms’ future when they conduct private placement,and the market discounts can be considered as a compensation for higher risk perception in firms with high customer concentration. In the meantime, high customer quality can mitigate this effect, and private placement for external expansion purpose can enhance this effect. This study has important political implications in the practice of customer relationship management and the regulation practice for private placement.

Key words: customer concentration, private placement, customer quality, fundraising purpose, market discount