Customer Satisfaction, Analyst Stock Recommendations, and Firm Value

Although managers are interested in the financial value of customers and researchers point out the importance of stock analysts who advise investors, no studies seem to have explored the implications of customer satisfaction for analyst stock recommendations. On the basis of a large-scale longitudinal dataset, the authors find that positive changes in customer satisfaction not only improve analyst recommendations but also lower dispersion in those recommendations for the firm. These effects are stronger when product market competition is high and financial market uncertainty is large. Also, analyst recommendations at least partially mediate the effects of changes in satisfaction on firm abnormal return, systematic risk, and idiosyncratic risk. Analyst recommendations represent a mechanism through which customer satisfaction affects firm value. Thus, if analysts pay attention to Main Street customer satisfaction, then Wall Street investors should have good reason to listen and follow. Overall, our research reveals satisfaction’s impact on analyst-based outcomes and firm value metrics and calls attention to the construct of customer satisfaction as a key intangible asset for the investor community

Consumer Complaints and Company Market Value

Consumer complaints affect company market value and common sense suggests that a negative impact is expected. However, do complaints always negatively impact company market value? We hypothesize in this study that complaints may have a non-linear effect on market value. Positive (e.g. avoiding high costs to solve complaints) and negative (e.g. speedy and intense diffusion) tradeoffs may occur given the level of complaints. To test our non-linear hypothesis, a panel data was collected from cell phone service providers from 2005 to 2013. The results supported our tradeoff rationale. Low levels of complaints allow for companies to increase market value, while high levels of complaints cause increasing harm to market value. The sample, model and period considered in this study, indicates a level of 0.49 complaints per thousand consumers as the threshold for a shift in tradeoffs. The effects on market value become increasingly negative when trying to make reductions to move below this level, due to negative tradeoffs

Does Online Chatter Really Matter? Dynamics of User-Generated Content and Stock Performance

User-Generated Content in online platforms or chatter for short provides a valuable source of consumer feedback on market performance of firms. This study examines whether chatter can predict stock market performance, which metric of chatter has the strongest relationship, and what the dynamics of the relationship are. The authors aggregate chatter (in the form of product reviews) from multiple websites over a four year period across six markets and fifteen firms. They derive multiple metrics of chatter (volume, positive chatter, negative chatter, and 5-start ratings) and use multivariate time series models to assess the short and long term relationship between chatter and stock market performance. They use three measures of stock market performance: abnormal returns, risk, and trading volume. The findings reveal that two metrics of chatter can predict abnormal returns with a lead of a few days. Of four metrics of chatter, volume shows the strongest relationship with returns and trading volume, followed by negative chatter. Whereas negative chatter has a strong effect on returns and trading volume with a short “wearin” and long “wearout,” positive chatter has no effect on these metrics. Negative chatter also increases volatility (risk) in returns. A portfolio analysis of trading stocks based on their chatter provides a return of 8% over and above normal market returns. In addition to the investing opportunities, the results show managers that chatter is an important metric to follow to gauge the performance of their brands and products. Because chatter is available daily and hourly, it 2 can provide an immediate pulse of performance that is not possible with infrequent sales and earnings reports. The fact that negative chatter is more important than positive, indicates that negatives are more diagnostic than positives. The negatives suggest what aspects of the products managers should focus on

Exploring the Relationship between Influencers’ Sentiment and Cryptocurrency Fluctuation through Microblogs

Scholars and practitioners increasingly recognize the importance of microblogs in capturing eWord of Mouth (eWoM) and their predictive power for cryptocurrency markets. This research in progress paper examines the extent to which microblog messages are related to bitcoin fluctuation. Building on information systems and finance literature, we examine the interactions between influencers’ extreme sentiment and the bitcoin fluctuation using natural language processing techniques and hypothesis testing. Our preliminary results show when influencers express extreme sentiment, in favour or against bitcoin, it is less likely that their tweets are related to future bitcoin fluctuation. However, when their extreme tweets are in-depth and unique, this negative relationship is moderated. Overall, our findings reveal that influencers’ sentiment is an important predictor in determining bitcoin fluctuation, but not all tweets are of equal impact. This study offers new insights into social media and its role in the cryptocurrency market

Good, better, engaged? The effect of company-initiated customer engagement behavior on shareholder value

In today’s connected world, customer engagement behaviors are very important. Many companies launch initiatives to stimulate customer engagement. However, despite evidence that customer engagement behavior also matters to share-holders, academic research on the firm value consequences of customer engagement campaigns is limited. This study is the first to investigate the value-related consequences of firm-initiated customer engagement behaviors, using shareholder evaluations of the public announcements of such initiatives. We find that companies’ customer engagement initiatives, on average, decrease market value, which is likely because the shareholders are sensitive to the risk of these initiatives backfiring.Nevertheless, initiatives that stimulate word-of-mouth are viewed less negatively than initiatives that solicit customer feedback, as are initiatives that are supported by social media. Companies that operate in a competitive environment or do not advertise much can create value by stimulating customer engagement, while companies with a strong corporate reputation are likely to not benefit from it

Negative Spillover of External WOM in Supply Chain Partnership

In this study, we explore how customers’ WOMs in firms’ crisis events spread across organizational boundaries to affect their supply chain partners. Based on guilt-by-association theory, we propose that both the external WOM effect and internal demand-supply effect have a mediator influence on the relationship between news report of crisis and firm performance of its supply chain partners. In other words, the damage of a crisis event will spread through two intermediaries, and finally be reflected in the stock market performance. We collected second-hand longitudinal data from financial databases, search engines, and social media to verify our hypotheses. Our results support both the direct and mediating role of News volume, WOM volume, and crisis-stricken firm’s abnormal returns on its supply chain partner’s abnormal returns. These findings not only help enrich the understanding of crisis spillover effect to supply chain partners, but also provide some guidance for investors and managers