Do institutional investors pay attention to customer satisfaction and why?
- 1.5k Downloads
Extant marketing, accounting, and finance research has neglected to examine the relevance of customer satisfaction information for institutional investors, despite their potential importance. This study develops and supports a framework suggesting that firms with positive changes in customer satisfaction are more attractive to transient institutional investors than to non-transient institutional investors. We also find that the impact of customer satisfaction on transient institutional investor holdings is contingent upon firm intangible asset intensity, product-market demand uncertainty, and financial market volatility. In addition, transient institutional investor holdings at least partially mediate the effects of changes in customer satisfaction on firm abnormal return and idiosyncratic risk. Thus, transient institutional investor investments represent a mechanism through which customer satisfaction affects firm value.
KeywordsCustomer satisfaction Investor community Institutional investor holding Intangibles Marketing-finance interface
We appreciate financial support from National Natural Science Foundation of China (Approval No. 71273013, 70802003, and 71132004), the support from China Ministry of Education Social Science and Humanities Research Planning Foundation (Approval No. 12YJA630186), and from Guanghua Leadership Institute (Approval #12-14). Aspara is grateful for research grants from Nasdaq OMX Nordic Foundation and Finnish Funding Agency for Technology and Innovation.
- Ali, A., Durtschi, C., Lev, B., & Trombley, M. (2004). Changes in institutional ownership and subsequent earnings announcement abnormal returns. Journal of Accounting, Auditing and Finance, 19, 221–248.Google Scholar
- Brancato, C. K., & Gaughan, P. (1991). Institutional investors and capital markets: 1991 update. Columbia Law School Institutional Investor Project. New York: Columbia Law School.Google Scholar
- Bushee, B. (1998). The influence of institutional investors on myopic R&D investment behavior. The Accounting Review, 73, 305–333.Google Scholar
- Chen, X., & Cheng, Q. (2006). Institutional holdings and analysts’ stock recommendations. Journal of Accounting, Auditing & Finance, 21, 399–440.Google Scholar
- Coyne, K., & Witter, J. (2002). What makes your stock price go up and down. McKinsey Quarterly, 2, 29–39.Google Scholar
- El-Gazzar, S. M. (1998). Predisclosure information and institutional ownership: a crossexamination of market revaluations during earnings announcement period. The Accounting Review, 73, 119–129.Google Scholar
- Farrell, C. (2009). A hunt for hidden values. Business Week, (June 1), 64–66.Google Scholar
- Graves, S., & Waddock, S. (1994). Institutional ownership and control: implications for long-term corporate strategy. The Academy of Management Executive, 4(February), 75–83.Google Scholar
- Jiang, H. (2010a). The role of institutional investors in corporate financing. In QFinance. London: Bloomsbury Information Ltd.Google Scholar
- Lang, M., & McNichols, M. (1997). Institutional trading and corporate performance. Stanford University working paper.Google Scholar
- Mavrinac, S., & Siesfeld, T. (1997). Measures that matter. An exploratory investigation of investors’ information needs and value priorities. Working paper. Ernst & Young Center for Business Innovation.Google Scholar
- Mavrinac, S., Jones, N., & Meyer, M. (1995). Competitive renewal through workplace innovation: The financial and non-financial returns to innovative workplace practices. U.S. Department of Labor and Ernst and Young LLP.Google Scholar
- Ramalingegowda, S., & Yu, Y. (2008). The effect of institutional investors’ incentives for monitoring versus trading on their demand for accounting conservatism. Working paper, University of Georgia and the University of Texas at Austin.Google Scholar
- Scharfstein, D. S., & Stein, J. C. (1990). Herd behavior and investment. American Economic Review, 80, 465–479.Google Scholar
- Sobel, M. E. (1982). Asymptotic intervals for indirect effects in structural equations models. In S. Leinhart (Ed.) Sociological methodology (pp. 290–312). San Francisco: Jossey-Bass.Google Scholar