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Corporate Purpose and Financial Performance

46 Pages Posted: 18 Sep 2016 Last revised: 19 Nov 2017

Claudine Madras Gartenberg

New York University (NYU) - Leonard N. Stern School of Business

Andrea Prat

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

George Serafeim

Harvard University - Harvard Business School

Date Written: June 30, 2016

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 that are characterized by high camaraderie between workers and firms that are 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 employees that maintain strong beliefs in the meaning of their work experience better performance.

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

Suggested Citation

Gartenberg, Claudine Madras and Prat, Andrea and Serafeim, George, Corporate Purpose and Financial Performance (June 30, 2016). Columbia Business School Research Paper No. 16-69. Available at SSRN: https://ssrn.com/abstract=2840005 or http://dx.doi.org/10.2139/ssrn.2840005

Claudine Gartenberg (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY NY 10012
United States

Andrea Prat

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

George Serafeim

Harvard University - Harvard Business School ( email )

381 Morgan Hall
Boston, MA 02163
United States

HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=15705

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