Inalienable Customer Capital, Corporate Liquidity, and Stock Returns
The Rodney L. White Center Working Papers Series at the Wharton School
78 Pages Posted: 15 Jun 2018 Last revised: 16 Jun 2020
Date Written: October 9, 2019
We develop a model in which customer capital depends on key talents' contribution and pure brand recognition. Customer capital guarantees stable demand but is fragile to financial constraints risk if retained mainly by talents, who tend to quit financially constrained firms, damaging customer capital. Using a proprietary, granular brand-perception survey, we construct a firm-level measure of the inalienability of customer capital (ICC) that captures the degree to which customer capital depends on talents. Firms with higher ICC have higher average returns, higher talent turnover, and more precautionary financial policies. The ICC-sorted long-short portfolio's spread comoves with financial constraints factor.
Keywords: Brand loyalty, Financial constraints risk, Inalienable human capital, Talent turnover, Marketing
JEL Classification: G12, G30, M31, M37, E22
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