Customer Satisfaction and Financial Analysts Earnings Forecast Errors

Posted: 4 Feb 2011

See all articles by Paul Valentin Ngobo

Paul Valentin Ngobo

University of Orleans

Jean-Francois Casta

University Paris-Dauphine - DRM Finance

Olivier J. Ramond

Université Paris Dauphine - CEREG Research Centre

Date Written: April 7, 2009

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 overreact to positive customer satisfaction information more than they respond to negative satisfaction information. Similarly, customer satisfaction reduces negative deviation more than positive deviation of the analysts’ forecasts from actual earnings. Finally, the effects of customer satisfaction on analysts’ forecast errors differ across economic sectors. We discuss the implications of our results for marketers and participants in financial markets.

Keywords: Customer Satisfaction, EPS Forecast Errors, Value Relevance, ACSI, GMM Dynamic Models

Suggested Citation

Ngobo, Paul Valentin and Casta, Jean-Francois and Ramond, Olivier J., Customer Satisfaction and Financial Analysts Earnings Forecast Errors (April 7, 2009). Available at SSRN: https://ssrn.com/abstract=1754604

Paul Valentin Ngobo (Contact Author)

University of Orleans ( email )

Rue de Blois
BP 6739
Orleans, Orleans cedex 2 45067
France

Jean-Francois Casta

University Paris-Dauphine - DRM Finance ( email )

Place du Maréchal de Lattre de Tassigny
Paris, 75775
France

Olivier J. Ramond

Université Paris Dauphine - CEREG Research Centre ( email )

Place du Maréchal de Lattre de Tassigny
Paris, 75116
France

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