Do Disclosures of Metrics Hurt Performance?

An article in the April 2017 Journal of Marketing Research poses the question: “Do Disclosures of Customer Metrics Lower  Investors’ and Analysts’ Uncertainty but Hurt Firm Performance?”

According to authors Emanuel Bayer, Kapil R. Tuli and Bernd Skiera, “Investors, analysts, and regulators frequently advocate greater disclosure of nonfinancial information, such as customer metrics. Managers, however,  argue that such metrics are costly to report, reveal sensitive information to  competitors, and therefore will lower future cash flows.”

A Marketing Science Institute report advocates expanding and formalizing disclosures of marketing-related activities and performance driver, and the Marketing Accountability Standards Board “has repeatedly called for more disclosures of marketing activities and outcomes.”

This study examines these counterarguments with the first empirical examination of  the prevalence and consequences of backward- and forward-looking
disclosures of customer metrics by manually coding 511 annual reports  of firms in two industries, telecommunications and airlines. The results reveal significant heterogeneity in the disclosure of customer metrics across firms and between industries.

“On average, in both industries, firms make more backward-looking than forward-looking disclosures. Notably, forward-looking disclosures of customer metrics are
negatively associated with investors’ uncertainty in both industries and with analysts’ uncertainty in the telecommunications industry. Importantly, the results do not support the managerial thesis that such disclosures have a  negative impact on future cash flows.”