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Article
Publication date: 2 February 2015

Wenbin Sun and Kexiu Cui

Service quality is a critical factor leading to firm returns. However, its benefit on the firm risk side metric is not clear. The purpose of this paper is to link firm service…

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Abstract

Purpose

Service quality is a critical factor leading to firm returns. However, its benefit on the firm risk side metric is not clear. The purpose of this paper is to link firm service quality and firm cash flow volatility (CFV) and further investigates this relationship by incorporating the moderating effects from three environmental variables: munificence, dynamism, and complexity.

Design/methodology/approach

This study is based on a secondary data approach. The data are collected from multiple sources such as AMAC and COMPUSTAT. Robust regressions with a panel data approach are adopted to analyze the data.

Findings

Corporate service quality level has a strong effect in reducing firm CFV. Its impact is found to have a varied strength when the relationship is moderated by the environmental factors. In particular, it functions more strongly in high dynamism and high complexity environments.

Practical implications

Service quality has effects beyond the previous thinking that is mainly concentrated on firm profits. Managers now should know that it is also effective in smoothing cash flow and thus yields benefits for future corporate planning. This is particularly meaningful for companies that operate in a turbulent industry as well as in a highly competitive market.

Originality/value

This study is the first attempt that links firm service quality and firm risk factor represented by the volatility of income flow. It extends the role of service quality to an area that is increasingly emphasized by marketing researchers, e.g. the risk aspect of firm market-based assets.

Details

Marketing Intelligence & Planning, vol. 33 no. 1
Type: Research Article
ISSN: 0263-4503

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