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So far, whether customers' involvement strengthens or weakens the process of service recovery has remained unclear. Filling this gap, this study aims to investigate the effect of customers' participation on customers' post-recovery outcomes in the context of the banking industry. More specifically, this study delineates how and when customer participation (CP) proves effective in creating and enhancing favourable post-recovery outcomes.

With the help of an online survey, this study collects responses from 314 bank customers and analyses them using SmartPLS.

The results show that customers' participation in service recovery positively affects customers' perceived utilitarian and hedonic values. Customers' perceived utilitarian and hedonic values positively influence customers' recovery satisfaction which, in turn, positively relates to their continuance intention and positive word-of-mouth (PWOM). Furthermore, customers' positive psychological capital (CPPC) positively moderates the relationship of CP in service recovery with perceived utilitarian value and hedonic value.

This study unveils the negative facet of co-created service recovery, which has rarely been addressed in the service recovery literature, especially in the context of the banking industry. This study demonstrates that the effectiveness of customers' participation in creating favourable post-recovery outcomes is contingent on CPPC. Moreover, this study confirms that not all customers may value customers' participation in the service recovery process.