Customer Orientation and Stock Resilience During Adversity Periods
60 Pages Posted: 30 Mar 2022 Last revised: 22 Aug 2023
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Customer Orientation and Stock Resilience During Adversity Periods
Customer Orientation and Stock Resilience During Adversity Periods
Date Written: February 2, 2022
Abstract
Customer orientation reflects the organizational culture and climate that promote behaviours enabling the firm to create superior value propositions for its customers. Using a textual measure of customer orientation (Custor) constructed from 10-K filings, we document a positive and economically significant relation between Custor and stock returns in the financial crisis of 2008-2009 and the COVID-19 pandemic. High-Custor firms outperform low-Custor firms by 1.5% per month during the financial crisis and by 4.7% per month during the COVID-19 crisis. Importantly, this positive Custor-returns relation is robust to different treatments and persists even after accounting for other well-known factors that contribute to corporate resilience, such as CSR activities. Our findings lend credence to the notion that customer orientation enhances a firm’s social capital, leading to improved operational performance during adverse periods. Consequently, stocks of firms that prioritize customer orientation experience greater resilience to negative shocks, especially during periods of low market confidence.
Keywords: Customer Orientation, Stock Returns, Corporate Resilience, Trust, Financial Crisis, COVID-19, Textual Analysis, 10-K filings
JEL Classification: G01, G11, G12,
Suggested Citation: Suggested Citation