Crowdsourced Employer Reviews and Stock Returns

Abstract

We find that firms experiencing improvements in crowdsourced employer ratings significantly outperform firms with declines. The return effect is concentrated among reviews from current employees, stronger among early firm reviews, and also stronger when the employee works in the headquarters state. Decomposing employer ratings, we find the return effect is related to changing employee assessments of career opportunities and views of senior management. It is unrelated to work-life balance. Employer rating changes are associated with growth in sales and profitability and help forecast one-quarter ahead earnings announcement surprises. The evidence is consistent with employee reviews revealing fundamental information about the firm.

Keywords: Glassdoor, employee satisfaction, market efficiency

JEL Classification: G14