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The Relationship Between Customer Equity and Market Value

In: Liss 2014

Author

Listed:
  • Hsiu-Yuan Tsao

    (National Chung Hsing University)

  • Hsin-Yu Chao

    (National Chung Hsing University)

Abstract

By investigating the connection between customer equity and market value, this paper seeks to bridge the growing information gap caused by an inability to recognize intangible assets such as customer equity. Customer equity was calculated using publicly available data of Netflix, E-trade and eBay from 2003 to 2012, including the number of new subscribers, the number of lost subscribers, cash flow from subscribers, retention rates, and acquisition rates. We propose a method to measure the relative contribution of customer equity to market value. Customer equity and an adjustment factor, called the customer equity index (market value over customer equity), were set as independent variables. The beta coefficient of customer equity and customer equity index are compared. The results of regression analysis indicate that customer equity alone were unable to reliably predict market value. However, the customer equity index along with customer equity did constitute a good predictor of market value.

Suggested Citation

  • Hsiu-Yuan Tsao & Hsin-Yu Chao, 2015. "The Relationship Between Customer Equity and Market Value," Springer Books, in: Zhenji Zhang & Zuojun Max Shen & Juliang Zhang & Runtong Zhang (ed.), Liss 2014, edition 127, pages 725-729, Springer.
    • Handle: RePEc:spr:sprchp:978-3-662-43871-8_104
    DOI: 10.1007/978-3-662-43871-8_104
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