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Exploring electronic word-of-mouth evaluation bias caused by online buyer-seller interaction

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  • Chiu, Ya-Ling
  • Hsu, Yuan-Teng
  • Wang, Jying-Nan
  • Yan, Chao

Abstract

Prior research suggests that firms' electronic word-of-mouth (eWOM) can influence institutional investors' decisions and firm value, making it a relevant issue in finance. This study examines potential biases in eWOM evaluations due to buyer–seller interactions in online transactions. Our model shows that sellers' online satisfaction ratings systematically overestimate their true quality, with the effect being more pronounced when sellers have lower intrinsic quality, greater ability to discern buyer satisfaction, and when buyers are less inclined to submit reviews. Empirically, user review ratios serve as indicators of whether sellers leverage interactions to increase review submissions. Using data from an online legal advice platform, we highlight the role of user review ratios in shaping online satisfaction and propose a conservative method to correct for inflated evaluations. These findings contribute to the eWOM literature and offer insights into its implications for firm valuation and financial decision-making.

Suggested Citation

  • Chiu, Ya-Ling & Hsu, Yuan-Teng & Wang, Jying-Nan & Yan, Chao, 2025. "Exploring electronic word-of-mouth evaluation bias caused by online buyer-seller interaction," International Review of Financial Analysis, Elsevier, vol. 106(C).
    • Handle: RePEc:eee:finana:v:106:y:2025:i:c:s1057521925006064
    DOI: 10.1016/j.irfa.2025.104519
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