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Is customer satisfaction a relevant metric for financial analysts?

Author

Listed:
  • Paul-Valentin Ngobo

    () (Valorem - LOG - Laboratoire Orléanais de Gestion - UO - Université d'Orléans)

  • Jean-François Casta

    () (DRM-Finance - DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)

  • Olivier Ramond

    () (DRM-Finance - DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)

Abstract

This study examines the effects of customer satisfaction on analysts' earnings forecast errors. Based on a sample of analysts following companies measured by the American Customer Satisfaction Index (ACSI), we find that customer satisfaction reduces earnings forecast errors. However, analysts respond to changes in customer satisfaction but not to the ACSI metric per se. Furthermore, the effects of customer satisfaction are asymmetric; for example, analysts are more willing to use good news (i.e. an increase in customer satisfaction information) than bad news (i.e. a decrease in satisfaction). Similarly, customer satisfaction reduces negative deviation more than positive deviation of the analysts' forecasts from actual earnings. Furthermore, the effects of customer satisfaction depend upon the base level of satisfaction that the firm has achieved. Finally, the effects of customer satisfaction on analysts' forecast errors differ across firms with volatile satisfaction scores and those with stable satisfaction scores. We discuss the implications of our results for marketers and participants in financial markets.

Suggested Citation

  • Paul-Valentin Ngobo & Jean-François Casta & Olivier Ramond, 2012. "Is customer satisfaction a relevant metric for financial analysts?," Post-Print halshs-00680003, HAL.
  • Handle: RePEc:hal:journl:halshs-00680003
    DOI: 10.1007/s11747-010-0242-1
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00680003
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    Keywords

    Customer satisfaction; EPS forecast errors; Value relevance; ACSI; GMM dynamic models; American Customer Satisfaction Index : Financial Analysts;

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