Stock market reactions to third‐party complaints

Abstract

Purpose

The purpose of this paper is to focus on the impact of third‐party complaints on firm performance. It aims to use a financial measurement of performance, the variation in firm share returns in the stock market following the publication of the Annual Complaints Service Report by the Bank of Spain. Building on modern theory of financial markets and resource‐based theory, it aims to propose that the release of information about third‐party complaints negatively influences firms' stock returns.

Design/methodology/approach

The empirical research is conducted on a sample of Spanish banks to which complaints were made and which were quoted on the Spanish Stock Exchange between 1992 and 2002. It employs the event study methodology.

Findings

The results of the study indicate that the release of the annual report of the Complaints Service of the Bank of Spain negatively affects the market's assessment of future cash flows.

Research limitations/implications

Banks of a large size were selected, which restricts generalisation of the conclusions. Future research is needed to validate the findings across a wider sample base (e.g. cross‐nationally). The study described is conducted in the banking industry. Therefore, more research is needed to examine the effects of third‐party complaints on performance in different industry contexts (e.g. airlines, mobile phone industry).

Practical implications

Firms should invest in improving complaint management systems in order to prevent future complaints reaching the third‐party level. The study results show that this information damages corporate reputation and it is negatively received by investors.

Originality/value

The study meets the demands for greater attention to be given to third‐party complaints made by various authors. It is also an attempt to better understand the chain from service and marketing effort to financial outcome and to link customer assets such as complaints to the value of the firm.

Citation

Casado‐Díaz, A.B., Mas‐Ruiz, F.J. and Sellers‐Rubio, R. (2009), "Stock market reactions to third‐party complaints", International Journal of Bank Marketing, Vol. 27 No. 2, pp. 167-183. https://doi.org/10.1108/02652320910935634