Corporate Purpose and Financial Performance

Organization Science, Forthcoming

164 Pages Posted: 18 Sep 2016 Last revised: 18 Oct 2018

See all articles by Claudine Madras Gartenberg

Claudine Madras Gartenberg

Wharton

Andrea Prat

Centre for Economic Policy Research (CEPR); Columbia Business School - Finance and Economics

George Serafeim

Harvard University - Harvard Business School

Date Written: October 9, 2018

Abstract

We construct a measure of corporate purpose within a sample of US companies based on approximately 500,000 survey responses of worker perceptions about their employers. We find that this measure of purpose is not related to financial performance. However, high purpose firms come in two forms: firms characterized by high camaraderie between workers and firms characterized by high clarity from management. We document that firms exhibiting both high purpose and clarity have systematically higher future accounting and stock market performance, even after controlling for current performance, and that this relation is driven by the perceptions of middle management and professional staff rather than senior executives, hourly or commissioned workers. Taken together, these results suggest that firms with mid-level employees with strong beliefs in the purpose of their organization and the clarity in the path towards that purpose experience better performance.

Keywords: corporate purpose, performance, employee engagement, work meaning

JEL Classification: M12, M14, M21, M54, J24

Suggested Citation

Gartenberg, Claudine Madras and Prat, Andrea and Serafeim, George, Corporate Purpose and Financial Performance (October 9, 2018). Organization Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2840005 or http://dx.doi.org/10.2139/ssrn.2840005

Claudine Madras Gartenberg (Contact Author)

Wharton ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States
2158987755 (Phone)

Andrea Prat

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

George Serafeim

Harvard University - Harvard Business School ( email )

381 Morgan Hall
Boston, MA 02163
United States

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