Does Customer Satisfaction Matter to Investors? Findings from the Bond Market
affiliation not provided to SSRN
Virginia Polytechnic Institute & State University
March 26, 2008
Journal of Marketing Research, Forthcoming
This paper examines whether customer satisfaction is associated with key metrics from corporate bond markets - credit ratings and cost of debt financing. We draw on theory in marketing and finance to predict how customer satisfaction should be associated with both measures. To test our hypotheses, we employ the American Customer Satisfaction Index (ACSI) database of more than 150 publicly traded firms during the period from 1994 to 2004. We control for factors known to influence the bond market, such as firm profitability and risk, as well as potential unobservable factors. We find firms with lower customer satisfaction exhibit lower credit ratings and higher debt costs - financial benefits of customer satisfaction not previously observed. We also find both effects are attenuated by the inherent level of risk faced by the firm.
Number of Pages in PDF File: 39
Keywords: Customer satisfcation, credit ratings, cost of debt
JEL Classification: G19, M31
Date posted: May 30, 2008 ; Last revised: March 25, 2009
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