Pollution Shock and Firm Performance
66 Pages Posted: 26 Jun 2018 Last revised: 18 Feb 2020
Date Written: October 6, 2019
This study examines the impact of air pollution shocks on consumer satisfaction and firm performance in the service sector. We show that air pollution shocks lead to an immediate decrease in consumer satisfaction, followed by a substantial rebound in consumer satisfaction for eight months after the haze completely dissipates. We employ sentiment analysis and topic modelling techniques to investigate the underlying mechanisms: the changes in consumers’ mood rather than decreases in service quality account for the decrease of review score during the haze shock, and an improvement in service quality restores consumer satisfaction after the pollution shocks. Our findings provide insights that managers need to effectively adjust their performance and strategies to mitigate the impact of environmental shocks.
Keywords: Air Pollution, Service Quality, Customer Review, Machine Learning
JEL Classification: C8, D2, L2, L8
Suggested Citation: Suggested Citation