The Link Between Job Satisfaction and Firm Value, with Implications for Corporate Social Responsibility
London Business School - Institute of Finance and Accounting; University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)
August 17, 2012
Academy of Management Perspectives, Forthcoming
How are job satisfaction and firm value linked? I tackle this long-standing management question using a new methodology from finance. I study the effect on firm-level value, rather than employee-level productivity, to take into account the cost of increasing job satisfaction. To address reverse causality, I measure firm value by using future stock returns, and control for risk, firm characteristics, industry performance, and outliers. Companies listed in the "100 Best Companies to Work For in America" generated 2.3-3.8%/year higher stock returns than their peers from 1984-2011. These results have three main implications. First, consistent with HRM theories, job satisfaction is beneficial for firm value. Second, corporate social responsibility can improve stock returns. Third, the stock market does not fully value intangible assets, and so it may be necessary to shield the manager from short-term stock prices to encourage long-run growth.
Number of Pages in PDF File: 29
Keywords: Human relations, human resource management, job satisfaction, corporate social responsibility
JEL Classification: G14, J28, M14Accepted Paper Series
Date posted: May 8, 2012 ; Last revised: February 13, 2013
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