Do disclosures of customer metrics lower investors' and analysts' uncertainty but hurt firm performance?
Investors, analysts, and regulators frequently advocate greater disclosure of nonfinancial information, such as customer metrics. Managers, however, argue that such metrics are costly to report, reveal sensitive information to competitors, and therefore will lower future cash flows. To examine these counterarguments, this study presents the first empirical examination of the prevalence and consequences of backward- and forward-looking disclosures of customer metrics by manually coding 511 annual reports of firms in two industries, telecommunications (365 reports) and airlines (146 reports). The results reveal significant heterogeneity in the disclosure of customer metrics across firms and between industries. On average, in both industries, firms make more backward-looking than forward-looking disclosures. Notably, forward-looking disclosures of customer metrics are negatively associated with investors' uncertainty in both industries and with analysts' uncertainty in the telecommunications industry. Importantly, the results do not support the managerial thesis that such disclosures have a negative impact on future cash flows.
Accounting, Customer metrics, Disclosure, Financial reporting, Marketing-finance interface
Corporate Finance | Finance and Financial Management | Strategic Management Policy
Journal of Marketing Research
American Marketing Association
BAYER, Emanuel; TULI, Kapil R.; and SKIERA, Bernd.
Do disclosures of customer metrics lower investors' and analysts' uncertainty but hurt firm performance?. (2017). Journal of Marketing Research. 54, (2), 239-259. Research Collection Lee Kong Chian School of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research_all/19