Customer perception measures driving financial performance: theoretical and empirical work for a large decentralized banking group

Purpose The purpose of this paper is to assess the usefulness and efficiency of customer-based measures such as customer satisfaction (CSI) and perceived loyalty for monitoring and enhancing the financial performance in corporations. Design/methodology/approach General financial data for the empirical modeling is compiled from national and international databases (Alla Bolag, IMF/IFS, Bloomberg, Eurostat, etc.) and company-specific data from the studied corporation. Customer perception data (like CSI and loyalty) are taken from the Extended Performance Satisfaction Index-initiative database (annual observations for the period 2001-2014 and quarterly for 2008-2014). A hierarchy of structural models is devised on a combined time-series and cross-section (panel and multi-level) approach. The results are based on models estimated by Arellano–Bond procedures (Arellano and Bond, 1991). Findings The core findings are two. First, there is a strong positive relationship between customer-based measures and financial performance. Second, it is effective to regularly monitor CSI as a forward- looking indicator for understanding future financial performance. Practical implications Customer-based measures are highly useful as leading indicators of companies’ future performance and should be incorporated even more into corporate decisions. Originality/value According to this survey of contemporary research, very little is academically documented for the full-circle from corporate to branch level. Thus, the prevailing study should be of potential value for companies in general.