The Impact of Financially Distressed Customers with an Emphasis on the Role of External and Internal Financing

Authors

  • Fatemeh Okhravi Department of Khayyam Non-Governmental University, Mashhad, Iran.
  • Seyed Hesam Vaghfi * Department of Management, Economics and Accounting of Payame Noor University, Tehran, Iran. https://orcid.org/0009-0007-8663-538X

https://doi.org/10.22105/aaa.v3i1.88

Abstract

From the perspective of the Resource Dependence Theory, customer concentration reflects a firm’s reliance on a limited number of key clients, which can increase operational and liquidity risks and exacerbate the likelihood of financial distress. Conversely, according to the pecking order theory of financing, access to internal financing as a low-cost and stable resource can mitigate the negative effects of customer concentration and serve a protective role against financial distress. This study aims to examine the impact of customer concentration on financial distress among firms listed on the Tehran Stock Exchange, with a particular focus on the moderating role of internal and external financing. The statistical population consists of 145 listed firms over the period 2018–2024, analyzed using panel logistic regression. The results indicate that customer concentration has a positive and significant effect on corporate financial distress. Furthermore, internal financing plays a significant inverse moderating role in reducing the impact of customer concentration on financial distress, whereas external financing does not exhibit a significant moderating effect. These findings highlight the importance of managing internal resources and reducing reliance on major customers to prevent financial distress. Beyond enriching the literature on financial distress and risk management, this study provides practical guidance for managers and policymakers seeking to enhance corporate financial resilience through effective customer and financing strategies.

Keywords:

Customer concentration, Internal financing, External financing, Financial distress, Firms listed on the Tehran stock exchange

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Published

2026-03-04

Issue

Vol. 3 No. 1 (2026): Accounting and Auditing with Applications (AAA)

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How to Cite

Okhravi, F. ., & Vaghfi, S. H. . (2026). The Impact of Financially Distressed Customers with an Emphasis on the Role of External and Internal Financing. Accounting and Auditing With Applications , 3(1), 1-16. https://doi.org/10.22105/aaa.v3i1.88

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