Customer Orientation and Stock Resilience During Adversity Periods

60 Pages Posted: 30 Mar 2022 Last revised: 22 Aug 2023

See all articles by Panayiotis C. Andreou

Panayiotis C. Andreou

Cyprus University of Technology

Neophytos Lambertides

Cyprus University of Technology

Lenos Trigeorgis

University of Cyprus - Department of Public and Business Administration; King’s College London; Massachusetts Institute of Technology (MIT) - Sloan School of Management

Ruslan Tuneshev

University of St Andrews

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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

Andreou, Panayiotis C. and Lambertides, Neophytos and Trigeorgis, Lenos and Tuneshev, Ruslan, Customer Orientation and Stock Resilience During Adversity Periods (February 2, 2022). Available at SSRN: https://ssrn.com/abstract=4028608 or http://dx.doi.org/10.2139/ssrn.4028608

Panayiotis C. Andreou (Contact Author)

Cyprus University of Technology ( email )

School Of Management and Economics
P.O. Box 50329
Lemesos, 3036
Cyprus

HOME PAGE: http://www.pandreou.com

Neophytos Lambertides

Cyprus University of Technology ( email )

Limassol, 3603
Cyprus

Lenos Trigeorgis

University of Cyprus - Department of Public and Business Administration ( email )

75 Kallipoleos Street
P.O. Box 20537
Nicosia CY-1678
Cyprus
00357 2 338762 (Phone)
00357 2 339063 (Fax)

King’s College London ( email )

Strand
London, England WC2R 2LS
United Kingdom

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

77 Massachusetts Ave. E62-663
Cambridge, MA 02142
United States

Ruslan Tuneshev

University of St Andrews ( email )

Castle Cliff
St Andrews
St Andrews, KY16 9AR
United Kingdom

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