Influence of customer perceived ethicality on customer loyalty in the banking industry of Pakistan

Abstract

Purpose The purpose of this paper is to determine empirically the effect of customer perceived ethicality (CPE) on customer loyalty (CL) and further the authors ascertained if customer trust (CT), customer affective commitment (CAC) and customer perceived quality (CPQ) acted as mediating mechanisms linking CPE and CL. This study also tested the influence of CL on customer word of mouth (CWOM). Design/methodology/approach In this study, data were collected from 390 customers of banks in Pakistan through a self-administered questionnaire and tested through partial least squares (PLS) with smart PLS 3.2.7 version. Findings Research findings provided evidence for the positive relationship between CPE and CL and mediating effects of CT, CAC and CPQ for the CPE–CL linkage. Furthermore, a positive and significant relationship between CL and CWOM was experienced. Practical implications This study can help banks to determine the importance of CT, CAC and CPQ, as they can facilitate translating CPE into CL. Furthermore, managers need to effectively communicate about their ethical activities and encourage their customers to share their experiences. Originality/value First, this paper has considered the effect of CPE on customer loyalty under research area of corporate service brands. Second, it examines the mediating role of three factors (CT, CAC and CPQ) between CPE and customer loyalty in the banking industry.