Employee approval of CEOs and firm value: Evidence from Employees’ choice awards

Abstract

Using Glassdoor’s list of “Top CEOs by Employees’ Choice,” we adopt a regression discontinuity (RD) specification to establish a causal link between the employee approval of CEOs and firm value. Having a CEO included in the top list results in an increase in firm performance in both stock returns and return on assets. Having a top CEO significantly increases a firm’s employee efficiency, attraction to future employees, hiring of high-quality laborers such as inventors, and attraction to the customers. Our findings establish that the CEO-employee relationship is an important, though intangible, component of a corporation, and we emphasize the critical role of perceived corporate culture in the spirit of Guiso, Sapienza and Zingales (2015).

Keywords: CEO-employee relationship; top CEO award; corporate culture; regression discontinuity

JEL Classification: G30, G34, M14