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Abstract:
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Customer satisfaction has been valued as an economic asset in the marketing literature because it can benefit firm's shareholder value and bring excess stock return. However, the importance of the heterogeneous and dynamic natures of the relationship between customer satisfaction and shareholder value has not been given sufficient attention. In this study, the authors employ new Bayesian models to investigate the association. Results indicate that customer satisfaction does not have a homogeneous positive effect on the shareholder value. Instead, its impact varies across firms and changes over time. The inter-firm difference is generally more significant than intra-firm temporal difference. Furthermore, large firm size and high market concentration tend to strengthen the association between customer satisfaction and shareholder value. Therefore, firm heterogeneity and dynamic nature of the association are important factors to consider when customer satisfaction is used to predict firms' financial performances and guide investment strategies.
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