Old signals, new era: Reconsidering how customer satisfaction and employee satisfaction impact shareholder wealth

Extant research suggests that higher levels of customer and employee satisfaction signal a firm's competitive advantage, resulting in greater firm value. This article advances the understanding of how firms can manage customer satisfaction and employee satisfaction to increase shareholder wealth in a new environment due to the emergence of social media and a new class of retail investors. Drawing from stakeholder theory and signaling theory, we argue that inconsistency in customer satisfaction and employee satisfaction can be informative to investors and lead to greater shareholder wealth in such a new environment. Our findings demonstrate that there is a negative joint effect of the two on shareholder wealth, such that unanticipated increases in employee satisfaction reduces shareholder wealth when customer satisfaction has also increased. Social media visibility and industry concentration are two key moderators that strengthen the negative joint effect. Our study provides important theoretical implications and valuable suggestions to managers to determine what their satisfaction indicators communicate in a new era where social media and the retail investor class have gained outsized importance.