Customer satisfaction and the cost of capital

Research output: Contribution to journalArticleResearchpeer-review


Using a sample of U.S. firms from 1995 through 2015 and the customer satisfaction scores from the American Customer Satisfaction Index, we find strong evidence that firms with higher customer satisfaction scores enjoy lower cost of equity capital, even after controlling for other factors that determine the cost of equity. In addition, results from a propensity score matched sample analysis, a difference-in-differences analysis, and instrumental variable regressions suggest that our findings are robust to accounting for endogeneity. We also document that customer satisfaction is positively related to investor recognition and financial report quality. The effect of customer satisfaction on the cost of equity increases with the level of information asymmetry, consistent with customer satisfaction mitigating information asymmetry. Overall, our findings suggest that customer satisfaction lowers a firm’s risk and significantly attenuates its financing costs.

Original languageEnglish
Pages (from-to)293-342
Number of pages50
JournalReview of Accounting Studies
Publication statusPublished - 2021


  • Corporate reputation
  • Cost of capital
  • Cost of equity
  • Customer satisfaction

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