Publications
Publications
- 2022
Customer Churn and Intangible Capital
By: Scott R. Baker, Brian Baugh and Marco Sammon
Abstract
Intangible capital is a crucial and growing piece of firms’ capital structure and helps to explain long run trends in concentration and markups. We develop new firm level metrics regarding a key component of intangible capital—customer churn—using a class of household transaction data that is increasingly available to researchers around the world. We show that customer attachment is associated with higher markups and market to book ratios and can help to explain many dimensions of firm-level volatility and risk in both real outcomes and asset prices. This new measure provides a more direct indicator of firms’ customer and brand capital than existing metrics like SG&A, R&D, or advertising expenditures and is also available for private firms. We demonstrate that low levels of customer churn push firms away from neoclassical investment responsiveness and that low churn firms are better able to insulate organization capital from the risk of key talent flight.
Keywords
Customer Base; Transaction Data; Customer Churn; Intangible Capital; Capital; Capital Structure; Customers; Corporate Finance
Citation
Baker, Scott R., Brian Baugh, and Marco Sammon. "Customer Churn and Intangible Capital." Working Paper, October 2022.