This paper examines how the target's customer concentration affects merger performance. We find that the acquirer purchasing a customer-concentrated firm experiences significantly lower stock market returns and worse long-run operating performance. The effect is more pronounced when customers face lower switching costs or the target undertakes a higher level of relationship-specific investments, exhibits higher cash volatility, or is acquired by a less well-known company. Further analysis shows that the negative association is mainly driven by corporate customers, while relatively safe government customers moderate the effect. We also find that shared major customers, overconfident CEOs, and poor corporate governance are more likely to increase the likelihood of customer-concentrated acquisitions. Overall, our findings suggest that higher customer concentration leads to lower value creation in mergers.

We analyze the impact of stock market indexing on option market conditions using local linear regressions on Russell Index reconstitution. Our findings reveal that put-call parity deviations are significantly smaller for stocks at the top of the Russell 2000 Index, compared to those at the bottom of the Russell 1000 Index. Those top Russell 2000 stocks also exhibit higher trading option volume and narrower bid-ask spreads. Our results suggest that stock market indexing enhances option market conditions through increased liquidity, reducing hedging costs that benefit market makers.