Does it Pay to Treat Employees Well? International Evidence on the Value of Employee-Friendly Culture
60 Pages Posted: 24 Feb 2017
Date Written: April 21, 2017
We examine the valuation impact of employee-friendly (EF) culture. Using a sample of 3,457 firms from 43 countries for the period 2003 to 2014, we show that firms with a more EF culture have higher valuations (Tobin’s q). The impact on valuation stems from improved technical efficiency and higher profitability. Consistent with the good governance view, we find that the positive valuation impact of an EF culture is larger for firms in countries with better investor protection, for firms with better governance and fewer agency problems, and for those in high-tech and in labor-intensive industries.
Keywords: Culture, Employee Treatment, Corporate Finance, Behavioral Finance, Governance, Valuation, International, Theory of the Firm
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