The Link Between Job Satisfaction and Firm Value, with Implications for Corporate Social Responsibility

Academy of Management Perspectives 26(4), 1-19, November 2012

29 Pages Posted: 8 May 2012 Last revised: 19 Dec 2013

Alex Edmans

London Business School - Institute of Finance and Accounting; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Date Written: August 17, 2012

Abstract

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.

Keywords: Human relations, human resource management, job satisfaction, corporate social responsibility

JEL Classification: G14, J28, M14

Suggested Citation

Edmans, Alex, The Link Between Job Satisfaction and Firm Value, with Implications for Corporate Social Responsibility (August 17, 2012). Academy of Management Perspectives 26(4), 1-19, November 2012. Available at SSRN: https://ssrn.com/abstract=2054066 or http://dx.doi.org/10.2139/ssrn.2054066

Alex Edmans (Contact Author)

London Business School - Institute of Finance and Accounting ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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