Perceived quality and Firm Risk: Does the Analyst translate?

Customers’ perceptions of quality are a leading indicator of firm success and risk. Therefore, the question arises concerning how customer-based perceptions of quality are channeled to financial markets. financial analysts assume the task of consolidating value-related information for investors. However, whether they incorporate information concerning perceived quality in their earnings forecasts remains in doubt. with a unique dataset of daily perceived quality information in the US, the UK, and Germany between 2008 and 2011, this study analyzes the impact of perceived quality on firm risk and shows that positive earnings surprises mediate the association between perceived quality and firm risk.