Financial Statement Analysis: A Review and Current Issues
China Finance Review International, forthcoming
30 Pages Posted: 10 Nov 2021
Andrew B. Jackson
UNSW Australia Business School, School of Accounting
Date Written: October 28, 2021
The literature on financial statement analysis attempts to improve fundamental analysis and to identify market inefficiencies with respect to financial statement information. In this paper, I review the extant research on financial statement analysis. I then provide some preliminary evidence using Chinese data and offer suggestions for future research, with a focus on utilising unique features of the Chinese business environment as motivation.
Keywords: financial statement analysis, fundamental analysis, forecasting, persistence, mean reversion
JEL Classification: M40, M41
Suggested Citation: Suggested Citation
Andrew B. Jackson (Contact Author)
Unsw australia business school, school of accounting ( email ).
Sydney, NSW 2052 Australia
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Literature Review On Financial Statements Analysis - College Essay - Shankarjadhav28 1
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Literature review on ratio analysis. Ratio Analysis on Literature of Review 2022-10-18
A literature review on ratio analysis is a survey of the existing research on the use of financial ratios to evaluate the financial performance and stability of a company. Ratio analysis is a common tool used by investors, analysts, and managers to assess the financial health of a company and make informed decisions about its future prospects.
There are various financial ratios that can be used in ratio analysis, including liquidity ratios, solvency ratios, profitability ratios, and efficiency ratios. Liquidity ratios measure a company's ability to meet its short-term financial obligations, such as the current ratio and the quick ratio. Solvency ratios, on the other hand, measure a company's ability to meet its long-term financial obligations, such as the debt-to-equity ratio and the interest coverage ratio. Profitability ratios measure a company's ability to generate profits, such as the return on assets and the return on equity. Efficiency ratios measure a company's ability to use its resources efficiently, such as the asset turnover ratio and the inventory turnover ratio.
There have been numerous studies on the use of financial ratios in ratio analysis. One study found that liquidity ratios are important indicators of a company's financial health, as they measure a company's ability to pay its short-term debts. Another study found that solvency ratios, such as the debt-to-equity ratio, can be used to assess a company's financial stability and risk of bankruptcy. Profitability ratios, such as the return on assets and the return on equity, have also been shown to be important indicators of a company's financial performance.
However, it is important to note that financial ratios should not be used in isolation, as they may provide conflicting or misleading information. It is recommended to use a combination of financial ratios and other financial analysis techniques, such as trend analysis and common-size financial statements, to get a more comprehensive understanding of a company's financial health.
In conclusion, ratio analysis is a valuable tool for evaluating a company's financial performance and stability. However, it is important to use a variety of financial ratios and consider other financial analysis techniques to get a complete picture of a company's financial health.
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They used various ratios under the segments liquidity, profitability, activity, solvency, marketability and growth. The study covered a period of six years ranging from 2006-07 to 2011-12. We use information technology and tools to increase productivity and facilitate new forms of scholarship. In a case study of ICICI bank, Gupta 2014 aimed to analyze and compare the Financial Performance of ICICI Bank for a period from 2009-10 to 2013-14. Page 38 of the Annual Financial Report shows these figures along with many other figures. A sample of five large companies was selected for the study.
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Information derived from financial statements is used to calculate most ratios and make projections. Profitability ratios are a class of measurement employed in assessing the ability of a business organisation to generate earnings relative to its expenses Goel, 2015. Strategic management Ratio Analysis- Literature 4. Whereas net profit means the amount arriving after deducting all the expenses which includes taxes also. . Various financial ratios like gross profit ratio, net profit ratio, operating ratio, dividend payout ratio, turnover ratio etc were used for financial analysis. Results of the study confirmed that through proper working capital management, the company can increase its profitability.
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The study revealed that liquidity ratios measure by current ratio CR , Liquid ratio LR and Cash Turnover Ratio, CATAR, CLTAR had a diminutive relationship with profitability measured by return on capital employed ROA and ROI. To do so, we create a conceptual framework that maps the influence of regulators, public Financial Performance Review and Objective While ratios are easy to compute, which in part explains their wide appeal, their interpretation is problematic, especially when two or more ratios provide conflicting signals. As accounting ratio is an expression relating two figures or accounts or two sets of account heads or group contain in the financial statements. I proudly utilize the privilege to express my hearty thanks to Principal, Dr. It is therefore, not surprising that ratio analysis feature are prominently in the literature on financial management. ORIGINS The primary cause of the evolution of ratio analysis in general was Euclid's rigorous analysis of the properties of ratios in Book V of his Elements in about 300 B. Horrigan T e ~utility of accounting data seems to be assumed axiomatically by most accountants, but it is interest- ing to trace how accounting data have actually been used.
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Thus, a history of the development of ratio analysis is at the same time a fairly accurate descrip- tion of its present practice. We use both approaches to characterize and to compare the financial structures of Indian companies over time; between quoted and unquoted companies; and between companies which belong to a business group and those that do not. The figures acquire adequate support from the management provided that the data cites credible and the right references. Result of the study indicated that pharmaceutical firms followed conservative investment and financing policies during study period. In addition to that, the study assessed and predicted the future performance of these companies. Correlation and regression analysis were used in the empirical analysis.
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A Training of the Register No: 098001123108 for Summer Internship Fourth Trimester of MASTER OF BUSINESS ADMINISTRATION during August - 2010. Ratio analysis is used to compare certain data within the financial statements to assess liquidity, solvency, profitability. What the ratio does is that they reveal the relationship in a more meaningful way so as to enable equity investors; management and lenders make better investment and credit decisions. The study covered a period of fourteen years from 1998- 99 to 2011-12. The data was analyzed with the help regression analysis to find out the impact of liquidity on profitability, Correlation analysis was used to find out the relationship between liquidity with profitability. Ratio comparisons can be used to compare the financial performance of time periods within the same organization or to compare the performance of different organizations. The results of all financial ratios, together with the prevailing situation of over competition, inelasticity of construction costs and reduced aggregate demand in Malaysia, revealed the extreme difficulty of reversing the financial performance in the coming years.
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Its appropriate use will go toward giving a true picture of the financial health of the unit. Finally, the researchers concluded that Maruti Suzuki had better strategic position in comparison to its competitors. Only with the help of ratios the financial statements are meaningful. Twelve manufacturing companies were selected for the study which had involved in the process of merger during 2000-2009. This relationship can be expressed as i percentages, say, net profits are 25percent of sales assuming net profits of Rs 25,000 and sales of Rs.
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Statement of research problem and methodological approach 5. School of Management BONAFIDE CERTIFICATE This is a bonafide certified of practical record work done by Mr. I am not asking for you to do my work. Medhat, 2006 used multiple regression analysis and correlations to test the financial performance of Omani Commercial banks. A STUDY ON FINANCIAL PERFORMANCE USING RATIO.
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This method will be used to measure the profitability, liquidity and efficiency of Tesco and analyse the performance of the business. A survey by the Home Office 2015 have found that in 2014, 16. It has assumed that drug Evidence Based Practice Proposal : Literature Support Evidence-Based Practice Proposal: Literature Support The literature review studies discuss the recurrent issue of higher and lower staffing ratios and how they affect patient outcomes. FCC, being the second largest company by assets, showed higher sales, higher profit before tax and higher return on asset during five years 2006-2010. Ratio is express by dividing one figure by the other related figure.
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- Vikas Mittal 1 ,
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- Narendra Bosukonda 6 &
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Marketing Letters ( 2023 ) Cite this article
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The authors synthesize research on the relationship of customer satisfaction with customer- and firm-level outcomes using a meta-analysis based on 535 correlations from 245 articles representing a combined sample size of 1,160,982. The results show a positive association of customer satisfaction with customer-level outcomes (retention, WOM, spending, and price) and firm-level outcomes (product-market, accounting, and financial-market performance). A moderator analysis shows the association varies due to many contextual factors and measurement characteristics. The results have important theoretical and managerial implications.
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1 introduction.
Oliver ( 2014 , p. 8) defines customer satisfaction (CS) as “a judgment that a product/service feature or the product or service itself provided (or is providing) a pleasurable level of consumption-related fulfillment, including levels of under- or over-fulfillment.” Similarly, Anderson and Sullivan ( 1993 , p. 126) characterize CS as a “post-purchase evaluation of product quality given repurchase expectations.” Thus, CS is a customer’s evaluative summary judgment of consumption experiences that is associated with customer- and firm-level outcomes.
Although we may theoretically know and expect that CS will have a positive association with many outcomes such as retention, WOM, and sales, a systematic and large-scale meta-analysis can provide important insights. First, it is important to compare differences in the strength of relationship across different customer- and firm-level outcomes (e.g., CS-retention vs. CS-sales). Second, it is important to examine the considerable variation in the magnitude of these relationships across studies. For example, some studies find the CS-retention correlation to be nonsignificant (e.g., van Birgelen, de Jong, and de Ruyter 2006 ) while others find a strong positive association (e.g., Anderson and Sullivan 1993 ).
Understanding the reasons behind these systematic differences can yield new and important research questions and insights. For example, is the association between CS and customer-level consequences stronger (or weaker) for business-to-consumer (B2C) markets relative to business-to-business (B2B) markets? What is the theoretical reason behind this difference, and what are its practical implications? Answering these questions can suggest more nuanced testable hypotheses and guide practitioners as well.
This study investigates the association of CS with 14 outcomes in a meta-analytic framework (see Fig. 1 , panel A). These outcomes include customer outcomes, product-market performance, accounting performance, and financial-market performance. These outcomes are of great importance to a firm’s chief marketing officer (CMO), chief sales officer (CSO), chief financial officer (CFO), and chief executive officer (CEO) (see Fig. 1 , panel B).
Customer satisfaction and its outcomes
As shown in Table 1 , there have been three meta-analyses of CS published in marketing journals. Szymanski and Henard ( 2001 ) conducted the first meta-analysis including 50 studies. Among them, 15 studies examined three CS outcomes (complaining, negative WOM, and repurchase) while 35 examined antecedents of CS. No studies investigated CS and firm-level outcomes.
Curtis et al. ( 2011 ) focused on CS and three customer-level outcomes, retention behavior, retention intention, and loyalty, with no firm-level outcomes. They showed that the positive association of CS with retention and loyalty varies across exchanges (goods vs. services), markets (B2C vs. B2B), and locations of study (North America vs. Europe vs. others).
The most recent meta-analysis by Otto, Szymanski, and Varadarajan ( 2020 ) did not examine any customer-level outcomes and included only five out of ten firm-level outcomes examined in the current study. While they included moderators such as goods vs. services and ACSI vs. non-ACSI metrics, factors such as location of study and scale points were not included.
This meta-analysis uses 535 effect sizes from 245 articles representing a combined sample size of 1,160,982 units, examines 14 effects, and includes nine moderators. It is the most comprehensive meta-analysis to date with a much larger number of articles, customer- and firm-level outcomes, and moderators (see Table 1 ).
2 Theoretical framework
Within the attitude-intentions-behavior framework (Fishbein and Ajzen 1975 ), satisfaction judgments are a function of expectations, disconfirmation, and performance (see, for a review, Oliver 2014 ). Satisfaction judgments drive customers’ behavioral intentions, which in turn guide subsequent actions such as WOM, repurchase, and spending. As customers repeatedly engage in these behaviors, their satisfaction judgments, intentions, and action are reinforced. The result of this process is a cumulative satisfaction judgment (Anderson, Fornell, and Lehmann 1994 ) and associated outcomes. This general process undergirds the framework in Fig. 1 , panel A. Note the current meta-analysis examines CS and its outcomes (and not antecedents).
2.1 Customer- and firm-level outcomes of customer satisfaction
Extant research has linked CS to four customer-level outcomes (retention, WOM, price outcomes, and spending outcomes) and ten firm-level outcomes (e.g., sales, cash flow, stock returns, and Tobin’s q ). Their definition, measures, and respective calculations are shown in Table 2 , panel A.
2.2 Moderators of the CS-outcomes relationship
Table 2 , panel B reports the nine moderators examined in this meta-analysis. These include (1) contextual factors such as type of exchange and location of study and (2) measurement characteristics including the number of items and the number of scale points in the CS measure, the source of CS measure (e.g., ACSI), the calculation of CS score (e.g., top-box score), and the measurement of outcome (e.g., behavior). Footnote 1
3 Methodology
3.1 literature search.
We identified studies using computerized searches of Web of Knowledge, ScienceDirect, and EBSCO with the keywords “customer satisfaction” and “consumer satisfaction.” We examined each issue of the major marketing journals in the USA and Europe starting from 1980. Footnote 2 Prior to 1980, CS research focused on its antecedents. We also reviewed and included pertinent articles from the three meta-analyses in Table 1 .
3.2 Criteria for inclusion/exclusion
A study was excluded if it: (1) measured satisfaction with specific attributes but not overall satisfaction, (2) used a composite measure of multiple outcomes (e.g., latent construct of repurchase and recommendation), and (3) did not report correlations or information that could be converted to correlations. Footnote 3 When a study provided multiple effect sizes, either for separate samples or relationships, we treated effects as independent. When a study provided multiple effect sizes for the same relationship (e.g., for subsets of the same sample), we calculated the average effect size. The final analyses use 535 correlations from 245 articles ( N = 1,160,982).
3.3 Approach to analysis
We calculate inverse-variance-weighted reliability-adjusted correlations between CS and each outcome (Hunter and Schmidt 2004 ). To adjust for reliability, we use Cronbach’s alpha (Nunally 1978 ) as a reliability measure and divide the raw correlations by the square root of the product of reliabilities of CS and the outcome. We are unable to correct for reliability for firm-level outcomes because they use a single metric based on archival financial data. We then transform the reliability-adjusted correlations to Fisher’s z coefficients and weight them by the inverse variance (i.e., 1/[ N – 3]). Finally, we transform the Fisher’s z coefficients back to correlations to arrive at the weighted reliability-adjusted correlations. Footnote 4 The analyses use a random effects approach for effect size integration.
3.3.1 Publication bias
To address the file-drawer problem, we report the fail-safe N (FSN). This calculates the number of studies that would have to be missing from the analysis to nullify an effect or reduce it to a level that is not theoretically or practically significant (Orwin 1983 ). A funnel plot shows minimal publication bias (Fig. A 1 in Web Appendix A).
3.3.2 Homogeneity and moderator analysis
The Q test assesses between-study variability in the population effect size estimated by the individual studies. Footnote 5 In Table 3 , a statistically significant Q statistic suggests the need for subgroup analysis (e.g., Pick and Eisend 2014 ). Thus, we compare effect sizes across different levels of each moderator.
4.1 CS and customer-level outcomes
Table 3 , panel A reports that CS has a strong association with retention ( r = 0.60, p < 0.01) and WOM ( r = 0.68, p < 0.01) and is moderately correlated with spending ( r = 0.28, p < 0.01) and price outcomes ( r = 0.39, p < 0.01). Footnote 6 The statistically significant Q tests ( p s < 0.01) for all four outcomes indicate that effect sizes may vary based on exchange type, market type, location of study, measurement of outcome, scale items, and scale points. Disaggregated results are shown in panel A of Table A 2 in Web Appendix A and discussed next.
4.2 Moderator analysis for customer-level outcomes
4.2.1 exchange.
For retention, the association with CS is stronger for mixed exchanges ( r MIXED = 0.69) than for services ( r SERVICES = 0.56) but not for goods ( r GOODS = 0.57); the association does not differ between goods and services. The association between CS and WOM is statistically not different among goods ( r GOODS = 0.66), services ( r SERVICES = 0.64), and mixed exchanges ( r MIXED = 0.74). For spending outcomes, the association with CS is statistically similar for goods ( r GOODS = 0.38), services ( r SERVICES = 0.22), and mixed exchanges ( r MIXED = 0.27). Finally, the association of CS and price outcomes is also not statistically different across goods ( r GOODS = 0.08), services ( r SERVICES = 0.41), and mixed exchanges ( r MIXED = 0.34). Footnote 7
4.2.2 Market
The CS-retention association is statistically stronger in B2B ( r B2B = 0.66) than in B2C ( r B2C = 0.55) but not in mixed markets ( r MIXED = 0.63). The CS-WOM relationship is stronger in B2B markets than in others ( r B2C = 0.61 vs. r B2B = 0.74 vs. vs. r MIXED = 0.42). The CS-spending outcomes relationship is not statistically different across B2C ( r B2C = 0.33), B2B ( r B2B = 0.16), and mixed markets ( r MIXED = 0.23). Finally, the CS-price outcomes association is statistically similar in B2C and B2B markets ( r B2C = 0.41 vs. r B2B = 0.18).
4.2.3 Location of study
Relative to Europe, North American samples exhibit a stronger association of CS with retention ( r NORTH.AMERICA = 0.63 vs. r EUROPE = 0.51 vs. r ASIA = 0.64 vs. r AFRICA = 0.82), WOM ( r NORTH.AMERICA = 0.71 vs. r EUROPE = 0.57 vs. r ASIA = 0.65 vs. r AFRICA = 0.41), and price outcomes ( r NORTH.AMERICA = 0.75 vs. r EUROPE = 0.35). For spending outcomes, the association with CS does not statistically differ among samples from North America ( r NORTH.AMERICA = 0.25), Europe ( r EUROPE = 0.30), and Asia ( r ASIA = 0.50).
4.2.4 Measurement of outcome
The association with CS is stronger when the outcome is measured as intentions than as behaviors for retention ( r BEHAVIOR = 0.21 vs. r INTENTION = 0.65) and WOM ( r BEHAVIOR = 0.50 vs. r INTENTION = 0.71) but not for spending outcomes ( r BEHAVIOR = 0.24 vs. r INTENTION = 0.41).
4.2.5 Scale items
The association with CS is stronger when a single- vs. a multiple-item CS scale is used for retention ( r SINGLE = 0.66 vs. r MULTI = 0.55) and WOM ( r SINGLE = 0.73 vs. r MULTI = 0.59) but statistically not different for spending outcomes ( r SINGLE = 0.22 vs. r MULTI = 0.31).
4.2.6 Scale points
The association of CS with outcomes is statistically similar for 5-, 7-, 10-, and 100-point scales ( r 5-POINT = 0.62 vs. r 7-POINT = 0.60 vs. r 10-POINT = 0.50 vs. r 100-POINT = 0.54 for retention; r 5-POINT = 0.65 vs. r 7-POINT = 0.71 vs. r 10-POINT = 0.50 vs. r 100-POINT = 0.65 for WOM; r 5-POINT = 0.28 vs. r 7-POINT = 0.33 vs. r 10-POINT = 0.21 vs. r 100-POINT = 0.23 for spending outcomes; and r 5-POINT = 0.24 vs. r 7-POINT = 0.41 for price outcomes).
4.3 CS and firm-level outcomes
The CS-outcomes correlation is smaller at the firm level than at the customer level (see Table 3 , panel B) potentially because firm-level outcomes are more distal than customer-level outcomes. Different than the association of CS with customer-level outcomes, the magnitude of the association of CS with firm-level outcomes can be classified as small to moderate. Footnote 8
Specifically, CS has a positive and statistically significant association with sales ( r = 0.15, p < 0.01), profit ( r = 0.10, p < 0.01), ROA ( r = 0.22, p < 0.01), Tobin’s q ( r = 0.29, p < 0.01), and stock returns ( r = 0.08, p < 0.05); a negative and statistically significant association with cash flow variability ( r = –0.10, p < 0.01), risk ( r = –0.23, p < 0.01), and cost of debt financing ( r = –0.14, p < 0.01). CS has a nonsignificant association with market share ( r = 0.05, p > 0.10) and a weak positive association with cash flow ( r = 0.09, p < 0.10), which may occur because they likely represent multiple subgroups with large between-group variability in the association (Whitener 1990 ). Footnote 9
The Q statistics for all outcomes, except for cost of debt financing, indicate a statistically significant heterogeneity among studies (see Table 3 , panel B). Yet, with a small number of exceptions, the association between CS and firm-level outcomes is not statistically different across subgroups based on different levels of moderators (see panel B of Table A 2 in Web Appendix A). There are several potential reasons for the statistically nonsignificant results. First, for several moderator levels, each outcome has been investigated by a small number of studies (i.e., k in panel B of Table A 2 in Web Appendix A). Second, most of the firm-level studies include samples from multiple industries and preclude us from isolating correlations based on specific industry settings. Finally, published studies typically do not report correlations disaggregated by firm-level moderators such as firm size, advertising and R&D intensity, and industry concentration. Therefore, we report means by subgroups for firm-level outcomes but do not discuss them further.
5 Implications
5.1 research implications.
First, the moderator analysis shows that there is substantial and systematic heterogeneity in the positive association between CS and customer-level outcomes. Yet, we do not understand the different patterns of variability and their implications. As an example, the association of CS with price outcomes is more heterogeneous than its association with spending outcomes across markets, exchange types, and locations of study. Is it because firms have more control on price outcomes but not on spending outcomes? These issues need further research.
Second, studies that simultaneously examine and compare the association of CS with multiple customer-level outcomes under different contexts are needed. Specifically, attention to differences in effect sizes among subgroups as well as their causes and implications is a key research direction.
Third, the association of CS is strongest for WOM, followed by retention, and is the weakest for spending and price outcomes. Future research should develop a conceptual and theoretical framework to understand these relative differences. Thus, is it the case that higher CS is more beneficial for growing new customers than retaining current customers? To the extent that WOM affects the cost of attracting new customers, customer equity research can be expanded by including CS as a contributing factor for retaining current customers and attracting new customers. Third, a wider set of potential moderators including psychological constructs such as trust and commitment as well as structural factors such as company size, industry growth, and competitive intensity should be investigated.
Fourth, these results make a very strong case that consumer behavior scholars should use CS as a consequential dependent variable in their studies. CS has a clear association with actual consumer behaviors and firm-level financial outcomes. Thus, consumer behavior scholars can be reasonably assured that differences in CS are consequential, i.e., predictive of actual consumer behaviors and firm financial outcomes.
Fifth, these results call into question the long-standing insistence on using multi-item scales for measuring CS. The CS-outcomes linkage is impervious to single- vs. multiple-item scales or number of scale points (i.e., 5- vs. 7- vs. 10- vs. 100-point scale). Simple and single item scales suffice; this is an important insight for practitioners who value simplicity to reduce the cost of customer surveys.
Sixth, at the firm level, the mean association of CS with market share ( p > 0.10) and cash flow ( p < 0.10) is nonsignificant to weak (Table 3 , panel B). This may be the case if the association of CS with these outcomes is nonlinear and/or contingent on factors such as firms’ ability to standardize or customize their offerings, the heterogeneity in consumer preferences, and the nature of the offering (e.g., goods vs. services; Anderson, Fornell, and Rust 1997 ). In the same vein, CS has a stronger association with ROA than with cash flow. While we can speculate on the potential reasons for this, more studies are needed to better estimate the effects and explain the differences. Finally, the small number of studies for subgroups within different levels of moderators precluded specific conclusions; clearly, more studies on CS-firm outcomes are needed.
5.2 Implications for firm strategy and senior executives
Figure 1 , panel B organizes the outcomes of CS based on their relevance to CMOs, CSOs, CFOs, and CEOs and board members. CMOs who organize their efforts around CS and make CS as their key metric should be able to make a case for their relevance and contribution to customer retention, WOM, spending, and price outcomes. While CMOs are free to focus on other constructs such as net promoter, this research provides clear, strong, and convincing evidence for using CS as a metric to measure marketing and sales performance and relate it to firm performance. Specifically, CS can provide the basis for CMOs and CSOs to collaboratively grow the current customer base organically as well as expand it through additional sales. The positive association of CS with ROA and cash flow and its negative association with cash flow variability speak to CFOs.
Finally, our work makes a clear case for CEOs and board members to utilize CS as an organizing framework for strategy planning and execution. By making customer value, as measured through CS, the central mechanism for creating and implementing strategy, CEOs can reliably increase Tobin’s q and stock returns while decreasing risk, outcomes for which CEOs are most responsible.
In summary, a focus on CS can align C-suite members (CEO, CFO, CMO, and CSO) using a theoretically sound, conceptually consistent, and empirically validated approach. We hope that senior leaders in firms embrace a satisfaction-based approach to strategy planning and execution based on these results.
6 Concluding comments
CS is a core construct for guiding strategy research and a consequential outcome for consumer-behavior research. This meta-analysis of 535 effect sizes from 245 articles shows that the positive outcomes of CS at the customer- and firm-level vary across different outcomes and across different study characteristics. The results provide guidance for research scholars and show how senior executives can adopt a CS-based framework to develop, guide, and implement firm strategy.
The current research has limitations. First, the results are limited by data availability, which precluded a larger number of outcomes or additional moderators. Second, variation in effect sizes remained even after accounting for contextual and measurement factors, suggesting that sources of variation still exist. Finally, our analysis was based on traditional meta-analytic framework and could not capture nonlinearity in the relationship between two constructs. Studies reporting correlations at different levels of moderators and boundary conditions in the association of CS with its consequences can be helpful in this regard.
Data Availability
Please contact authors for data availability.
We calculated the proportion of studies for each combination of levels in different moderators. Table A1 in Web Appendix A reports the proportions showing adequate variation in study settings.
Journals include Journal of Marketing , Journal of Marketing Research , Marketing Science , Journal of Consumer Research , Journal of Service Research , Journal of Retailing , Journal of the Academy of Marketing Science , Journal of Services Marketing , Journal of Service Industry Management , Journal of Consumer Satisfaction, Dissatisfaction, and Complaining Behavior , Journal of Business Research , and International Journal of Service Industry Management. The list of papers included in the meta-analysis is provided in Web Appendix B.
We contacted 44 authors to request missing correlations for studies, and 17% of them provided the correlations.
We use the Fisher’s z transformation due to potential issues associated with using raw correlations. Specifically, different than Fisher’s z scores, raw correlations may be highly skewed and have a problematic standard error formulation: the standard error is used to compute the inverse variance weight in the meta-analysis (Lipsey and Wilson 2001 ). Still, we computed results using raw correlations. Reassuringly, most of the results remained unchanged when using Fisher’s z or correlations.
The Q statistic is computed by summing the squared deviations of each study’s effect estimate from the overall estimate, weighting each study by the inverse of its variance, and has a chi-square distribution with k – 1 degrees of freedom ( k = number of effect sizes). A statistically significant Q statistic indicates the effect size varies across studies. The Q statistic has low power to detect heterogeneity when the number of studies is small or sample size within studies is low. Thus, it should be interpreted cautiously.
Following Cohen ( 1992 ), we deem a correlation of 0.10 as small, 0.30 as medium, and 0.50 as large. Notably, the magnitude and the statistical significance of the correlations of CS with retention and WOM are similar to those reported in Szymanski and Henard ( 2001 ) and Curtis et al. ( 2011 ).
The very small sample size for goods and mixed exchanges precludes meaningful statistical comparisons.
We use Cohen’s ( 1992 ) standards for effect sizes in our interpretation. It may be the case that higher/more conservative standards are required because lower-level variability influences higher-level effects (e.g., individual-level variability is ignored in the estimate of firm-level effects).
Notably, the magnitude and the statistical significance of the correlations of CS with market share, sales, profit, Tobin’s q , and stock returns are similar to those reported in Otto, Szymanski, and Varadarajan ( 2020 ).
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