Customer Satisfaction and Stock Prices: High Returns, Low Risk (original) (raw)

Customer Satisfaction and Stock

2013

Do investments in customer satisfaction lead to excess returns? If so, are these returns associated with higher stock market risk? The empirical evidence presented in this article suggests that the answer to the first question is yes, but equally remarkable, the answer to the second question is no, suggesting that satisfied customers are economic assets with high returns/low risk. Although these results demonstrate stock market imperfections with respect to the time it takes for share prices to adjust, they are consistent with previous studies in marketing in that a firm’s satisfied customers are likely to improve both the level and the stability of net cash flows. The implication, implausible as it may seem in other contexts, is high return/low risk. Specifically, the authors find that customer satisfaction, as measured by the American Customer Satisfaction Index (ACSI), is significantly related to market value of equity. Yet news about ACSI results does not move share prices. This...

Commentary—The Stock Market\u27s Pricing of Customer Satisfaction

2009

A number of recent marketing studies examine the stock market\u27s response to the release of American Customer Satisfaction Index (ACSI) scores. The broad purpose of these studies is to investigate the stock market\u27s valuation of customer satisfaction. However, a key focus is on whether customer satisfaction information predicts long-run returns. We provide evidence on the market\u27s pricing of ACSI information using a more comprehensive set of well-established tests from the accounting and finance literatures. We find that ACSI scores provide some incremental information on future operating income and that the market quickly responds to the release of information on large increases in satisfaction. However, we find no evidence that ACSI predicts long-run returns. These results suggest that customer satisfaction information is value relevant, but they are also consistent with Jacobson and Mizik\u27s conclusion [Jacobson, R., N. Mizik. 2009. The financial markets and customer sa...

Customer Satisfaction and Stock Returns Risk

Journal of Marketing, 2009

Over the past decade, several studies have argued that customer satisfaction has high relevance for financial markets because it has a significant impact on stock returns. However, little attention has been given to understanding the impact of customer satisfaction on the risk of stock returns. The finance literature suggests that investors that judge performance only in terms of returns place more resources than warranted in risky opportunities, forgo profitable opportunities, and apply misguided performance evaluations. Accordingly, this study develops, tests, and finds empirical support for the hypotheses that positive changes (i.e., improvement) in customer satisfaction result in negative changes (i.e., reduction) in overall and downside systematic and idiosyncratic risk. Using a panel data sample of publicly traded U.S. firms and satisfaction data from the American Customer Satisfaction Index, the study demonstrates that investments in customer satisfaction insulate a firm'...