Customer satisfaction index and financial performance: a European cross country study

Abstract

Purpose - The purpose of this paper is to examine the relationship between customer satisfaction measured as Extended Performance Satisfaction Index (EPSI) and the financial performance of the banking sector for seven European countries over the period 2004-2014. Design/methodology/approach - Using panel models, this study finds a significant positive influence of EPSI on banking financial performance at the country level. Findings - Findings suggest that the value of the customer satisfaction index is important in explaining the financial performance of the banking industry at the aggregative country level. The customer satisfaction index measured as EPSI has a strong positive influence on the financial performance of the banking industry for the various North European countries studied. It was shown that EPSI has a positive influence on both total assets and total equity, with a higher relative influence and stronger significance on the total assets of the banking sector than on total equity. Originality/value - The study contributes to understanding the importance of measuring and maintaining customer satisfaction as a profitability driver in the banking industry, providing new cross-country evidence. It also contributes to the literature focussing on a group of countries that have not previously been studied.