Does Culture Pay? Evidence from Crowdsourced Employee Engagement Data

Abstract

Corporate culture is an increasingly important mechanism for retaining and motivating employees. Using a new survey tool in partnership with PayScale.com between 2014 and 2016, I first document dispersion in job satisfaction and corporate culture in the labor market, and, secondly, recover a willingness to pay for these amenities. A value-weighted portfolio of companies with high levels of corporate culture earns a monthly four-factor alpha that is 13% higher than companies with low levels of culture. To understand the source of these abnormal returns, I estimate employees' willingness to pay for corporate culture. Exploiting variation in the outside option that employees face to control for rents and matching frictions, I find that employees are willing to give up 1.7% of their annual earnings, or $1,159 per year, for a standard deviation increase in corporate culture.

Keywords: Organizational practices, firm value, job satisfaction, turnover, compensating differentials, productivity

JEL Classification: L20, M51, M52, M54, M55