Customer satisfaction as a buffer against sentimental stock-price corrections
- 735 Downloads
Previous research has shown that customer satisfaction is a market-based asset that can contribute to a firm’s value by increasing its stock-market returns, while simultaneously reducing the riskiness of these returns. This study contributes to the growing literature on the marketing–finance interface by examining the relationship between customer satisfaction and a type of risk that has not been previously studied in the marketing literature: the vulnerability of a firm’s stock price to the stock-market corrections that typically follow periods of high investor sentiment. The results show that customer satisfaction can function as a buffer against the risk of such sentimental stock-price movements and reduces their negative impact on a firm’s market value. In particular, we find that firms with higher (lower) levels of customer satisfaction exhibit smaller (greater) price corrections and higher returns after periods of high investor sentiment.
KeywordsCustomer satisfaction Investor sentiment Market-based assets Marketing–finance interface
The authors thank the editor, Frank R. Kardes, and an anonymous reviewer for their insightful comments that helped us improve the manuscript. The authors thank Jeroen Derwall and Peter Schotman for their useful suggestions regarding the econometric analyses. Finally, the authors thank Donna Maurer for her editorial help.
- Ali, A., & Gurun, U. G. (2009). Investor sentiment, accruals anomaly, and accruals management. Journal of Accounting, Auditing & Finance, 24(3), 415–431.Google Scholar
- Daniel, K. & Titman, S. (2006). “Market Reactions to Tangible and Intangible Information”, Journal of Finance, 61(4), 1605–1643.Google Scholar
- Derwall, J., Hann, D., Kalogeras, N. (2010). Does the Market Misprice Customer Satisfaction? New Evidence on Errors in Investors’ Expectations. Working Paper, Available at SSRN: http://ssrn.com/abstract=1564185. Accessed 1 Jan 2012.
- Evanschitzky, H., Groening, C., Mittal, V., & Wunderlich, M. (2011). “How Employer and Employee Satisfaction Affect Customer Satisfaction: An Application to Franchise Services”, Journal of Service Research, 14(2), 136–148.Google Scholar
- Markowitz, H. (1952). Portfolio selection. Journal of Finance, 7(1), 77–91.Google Scholar
- Markowitz, H. (1959). Portfolio selection: efficient diversification of investments. New York: Wiley.Google Scholar
- Shefrin, H. (2008). A behavioral approach to asset pricing. Boston: Elsevier Academic Press.Google Scholar