Does it Pay to Treat Employees Well? International Evidence on the Value of Employee-Friendly Culture

60 Pages Posted: 24 Feb 2017

See all articles by Larry Fauver

Larry Fauver

University of Tennessee, Knoxville - Department of Finance; University of Tennessee

Michael McDonald

Fairfield University - Charles F. Dolan School of Business

Alvaro G. Taboada

Mississippi State University

Date Written: April 21, 2017

Abstract

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

Suggested Citation

Fauver, Larry and McDonald, Michael and Taboada, Alvaro G., Does it Pay to Treat Employees Well? International Evidence on the Value of Employee-Friendly Culture (April 21, 2017). Available at SSRN: https://ssrn.com/abstract=2957245 or http://dx.doi.org/10.2139/ssrn.2922236

Larry Fauver (Contact Author)

University of Tennessee, Knoxville - Department of Finance ( email )

424 Stokely Management Center
Knoxville, TN 37996
United States

University of Tennessee ( email )

424 Stokely Management Center
Department of Finance
Knoxville, TN 37996-0540
United States
865-974-1722 (Phone)
865-974-1716 (Fax)

Michael McDonald

Fairfield University - Charles F. Dolan School of Business ( email )

N. Benson Road
Fairfield, CT 06824
United States

Alvaro G. Taboada

Mississippi State University ( email )

310-H McCool Hall
PO Box 9580
Mississippi State, MS 39762
United States
662-325-6716 (Phone)
662-325-1977 (Fax)

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