The Financial Consequences of Customer Satisfaction : Evidence from Yelp Ratings and SBA Loans

This paper demonstrates the financial and real consequences of customer satisfaction using a novel and comprehensive Yelp dataset. I show that Yelp ratings are significant indicators of business outcomes in a regression discontinuity design setting. A one-half star increase in Yelp ratings leads to a higher probability of receiving SBA loans, better loan terms, and better loan performance. The results are more pronounced when banks have less information about the borrowers. Yelp ratings become less effective when using repeated loan transactions. Higher Yelp ratings lead to increases in consumer demand and the likelihood of subsequent business opening