IDEAS home Printed from https://ideas.repec.org/p/ecl/stabus/2036.html
   My bibliography  Save this paper

The Stock Market's Pricing of Customer Satisfaction

Author

Listed:
  • Ittner, Christopher D.

    (University of Pennsylvania)

  • Larcker, David F.

    (Stanford University)

  • Taylor, Daniel J.

    (Stanford University)

Abstract

A number of recent marketing studies examine the stock market's response to the release of American Customer Satisfaction Index (ACSI) scores. The broad purpose of these studies is to investigate the stock market's valuation of customer satisfaction. However, a key focus is on whether customer satisfaction information predicts long-run returns. We provide evidence on the market's 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 are also consistent with Jacobson and Mizik's (2009) conclusion that mispricing of ACSI information, if present at all, is limited.

Suggested Citation

  • Ittner, Christopher D. & Larcker, David F. & Taylor, Daniel J., 2009. "The Stock Market's Pricing of Customer Satisfaction," Research Papers 2036, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:2036
    as

    Download full text from publisher

    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP2036.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Blume, Marshall E. & Stambaugh, Robert F., 1983. "Biases in computed returns : An application to the size effect," Journal of Financial Economics, Elsevier, vol. 12(3), pages 387-404, November.
    2. Fama, Eugene F & French, Kenneth R, 2000. "Forecasting Profitability and Earnings," The Journal of Business, University of Chicago Press, vol. 73(2), pages 161-175, April.
    3. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    4. Brav, Alon & Geczy, Christopher & Gompers, Paul A., 2000. "Is the abnormal return following equity issuances anomalous?," Journal of Financial Economics, Elsevier, vol. 56(2), pages 209-249, May.
    5. Robert Jacobson & Natalie Mizik, 2009. "The Financial Markets and Customer Satisfaction: Reexamining Possible Financial Market Mispricing of Customer Satisfaction," Marketing Science, INFORMS, vol. 28(5), pages 810-819, 09-10.
    6. Fama, Eugene F & French, Kenneth R, 1996. "Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Terpstra, Maarten & Verbeeten, Frank H.M., 2014. "Customer satisfaction: Cost driver or value driver? Empirical evidence from the financial services industry," European Management Journal, Elsevier, vol. 32(3), pages 499-508.
    2. Camelia-Daniela Hategan & Ruxandra-Ioana Pitorac & Vasile-Petru Hategan & Carmen Mihaela Imbrescu, 2021. "Opportunities and Challenges of Companies from the Romanian E-Commerce Market for Sustainable Competitiveness," Sustainability, MDPI, vol. 13(23), pages 1-15, December.
    3. Eric T. Bradlow, 2009. "Does Everything Being Resolved Equal Nothing Gained? Bringing in the Wisdom of the Academic Crowd," Marketing Science, INFORMS, vol. 28(5), pages 809-809, 09-10.
    4. Guenther, Miriam & Guenther, Peter, 2021. "The complex firm financial effects of customer satisfaction improvements," International Journal of Research in Marketing, Elsevier, vol. 38(3), pages 639-662.
    5. Robert Merrin & Arvid Hoffmann & Joost Pennings, 2013. "Customer satisfaction as a buffer against sentimental stock-price corrections," Marketing Letters, Springer, vol. 24(1), pages 13-27, March.
    6. Robert Jacobson & Natalie Mizik, 2009. "—Customer Satisfaction-Based Mispricing: Issues and Misconceptions," Marketing Science, INFORMS, vol. 28(5), pages 836-845, 09-10.
    7. Huang, Ming-Hui & Trusov, Michael, 2020. "Customer satisfaction underappreciation: The relation of customer satisfaction to CEO compensation," International Journal of Research in Marketing, Elsevier, vol. 37(1), pages 129-150.
    8. Steven Crawford & Ying Huang & Ningzhong Li & Ziyun Yang, 2020. "Customer Concentration and Public Disclosure: Evidence from Management Earnings and Sales Forecasts†," Contemporary Accounting Research, John Wiley & Sons, vol. 37(1), pages 131-159, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christopher Ittner & David Larcker & Daniel Taylor, 2009. "—The Stock Market's Pricing of Customer Satisfaction," Marketing Science, INFORMS, vol. 28(5), pages 826-835, 09-10.
    2. Chan, Konan & Ikenberry, David L. & Lee, Inmoo & Wang, Yanzhi, 2010. "Share repurchases as a potential tool to mislead investors," Journal of Corporate Finance, Elsevier, vol. 16(2), pages 137-158, April.
    3. Adam Zaremba & Jacob Koby Shemer, 2018. "Price-Based Investment Strategies," Springer Books, Springer, number 978-3-319-91530-2, September.
    4. Keith Lam & Frank Li, 2008. "The risk premiums of the four-factor asset pricing model in the Hong Kong stock market," Applied Financial Economics, Taylor & Francis Journals, vol. 18(20), pages 1667-1680.
    5. David Hirshleifer & Kewei Hou & Siew Hong Teoh, 2012. "The Accrual Anomaly: Risk or Mispricing?," Management Science, INFORMS, vol. 58(2), pages 320-335, February.
    6. Daniel, Kent & Hirshleifer, David & Teoh, Siew Hong, 2002. "Investor psychology in capital markets: evidence and policy implications," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 139-209, January.
    7. Shivakumar, Lakshmanan, 2000. "Do firms mislead investors by overstating earnings before seasoned equity offerings?," Journal of Accounting and Economics, Elsevier, vol. 29(3), pages 339-371, June.
    8. Kothari, S. P., 2001. "Capital markets research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 105-231, September.
    9. Tomasz Wójtowicz, 2017. "High-volume return premium on the stock markets in Warsaw and Vienna," Bank i Kredyt, Narodowy Bank Polski, vol. 48(4), pages 375-402.
    10. Su, Chen & Bangassa, Kenbata, 2011. "The impact of underwriter reputation on initial returns and long-run performance of Chinese IPOs," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(5), pages 760-791.
    11. Caldeira, João F & Moura, Guilherme Valle & Santos, André Alves Portela, 2013. "Seleção de carteiras utilizando o modelo Fama-French-Carhart," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 67(1), April.
    12. repec:fau:fauart:v:65:y:2015:i:1:p:84-104 is not listed on IDEAS
    13. Claes Fornell & Sunil Mithas & Forrest V. Morgeson, III, 2009. "—The Economic and Statistical Significance of Stock Returns on Customer Satisfaction," Marketing Science, INFORMS, vol. 28(5), pages 820-825, 09-10.
    14. Ahern, Kenneth R., 2009. "Sample selection and event study estimation," Journal of Empirical Finance, Elsevier, vol. 16(3), pages 466-482, June.
    15. Kewei Hou & Chen Xue & Lu Zhang, 2017. "Replicating Anomalies," NBER Working Papers 23394, National Bureau of Economic Research, Inc.
    16. Keith Lam & Frank Li & Simon So, 2010. "On the validity of the augmented Fama and French’s (1993) model: evidence from the Hong Kong stock market," Review of Quantitative Finance and Accounting, Springer, vol. 35(1), pages 89-111, July.
    17. Vitali Alexeev & Katja Ignatieva, 2021. "Biases in variance of decomposed portfolio returns," International Review of Finance, International Review of Finance Ltd., vol. 21(4), pages 1152-1178, December.
    18. Chen, Sheng-Syan & Wang, Yanzhi, 2012. "Financial constraints and share repurchases," Journal of Financial Economics, Elsevier, vol. 105(2), pages 311-331.
    19. Zaremba Adam & Konieczka Przemysław, 2017. "Size, Value, and Momentum in Polish Equity Returns: Local or International Factors?," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 53(3), pages 26-47, September.
    20. L'Her, Jean-Francois & Masmoudi, Tarek & Suret, Jean-Marc, 2004. "Evidence to support the four-factor pricing model from the Canadian stock market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 14(4), pages 313-328, October.
    21. Chen, Sheng-Syan & Ho, Kim Wai & Huang, Chia-Wei & Wang, Yanzhi, 2013. "Buyback behavior of initial public offering firms," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 32-42.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecl:stabus:2036. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/gsstaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.