Customer Satisfaction and Stock Prices: High Returns, Low Risk

Abstract Do investments in customer satisfaction lead to excess returns? If so, are these returns associated with higher stock market risk? The empirical evidence presented in this article suggests that the answer to the first question is yes, but equally remarkable, the answer to the second question is no, suggesting that satisfied customers are economic assets with high returns/low risk. Although these results demonstrate stock market imperfections with respect to the time it takes for share prices to adjust, they are consistent with previous studies in marketing in that a firm's satisfied customers are likely to improve both the level and the stability of net cash flows. The implication, implausible as it…