Corporate Purpose and Financial Performance
Organization Science, Forthcoming
164 Pages Posted: 18 Sep 2016 Last revised: 18 Oct 2018
Date Written: October 9, 2018
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
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