The Financial Markets and Customer Satisfaction: Reexamining Possible Financial Market Mispricing of Customer Satisfaction

Making use of the efficient markets hypothesis as a starting point for analysis, we propose an approach for assessing financial value implications of marketing metrics. We illustrate the approach by investigating the association between information contained in the ACSI customer satisfaction metric and stock market performance. Our findings differ from previous research in that the methodological approach we utilize, while nesting other hypotheses, incorporates a number of efficient market considerations that previous research has not taken into account, e.g., issues ranging from unmodeled autocorrelation, to risk adjustments, to utilizing the unanticipated component of a series in financial market analysis. We find evidence supportive of satisfaction value relevance only for firms in the computer/internet sector. Unanticipated changes in satisfaction do not provide incremental information to accounting measures in explaining abnormal (i.e., risk-adjusted) stock returns in other sectors. We find no evidence of a customer satisfaction-based financial market anomaly. Information contained in the customer satisfaction metric per se is not significantly related to future-period risk-adjusted stock returns. The mispricing anomaly reported in past research stems not from a systemic failure of the financial markets to impound the financial implications of customer satisfaction into current stock price, but rather from abnormal returns achieved by a small group of satisfaction leaders in the computer and internet sector over the period of study.