The Value of Employee Satisfaction in Disastrous Times: Evidence from COVID-19

Review of Finance

61 Pages Posted: 26 Mar 2020 Last revised: 18 Apr 2022

See all articles by Chenyu Shan

Chenyu Shan

Shanghai University of Finance and Economics

Dragon Yongjun Tang

The University of Hong Kong - Faculty of Business and Economics

Date Written: March 30, 2022

Abstract

Employee treatment is an important but challenging element of corporate environmental, social, and governance (ESG) policies. Satisfying employee needs can increase corporate productivity, but is also costly to shareholders. Using unique data for Chinese publicly listed firms, we show that having satisfied employees is valuable to the firm. Specifically, firms with higher employee satisfaction scores withstand COVID-19 better, in terms of stock market performance. Such an effect is more pronounced for firms with more intangible assets and in knowledge-based industries. Moreover, higher employee satisfaction scores predict better operating performance. While not fully revealed in tranquil times, the effect of employee satisfaction is materialized when the firms experience negative shocks, such as COVID-19. Our findings suggest that firms can do well in crisis periods by doing good in normal times.

Keywords: Employee satisfaction, Shareholder value, Intangible assets, COVID-19

JEL Classification: G32, G34

Suggested Citation

Shan, Chenyu and Tang, Dragon Yongjun, The Value of Employee Satisfaction in Disastrous Times: Evidence from COVID-19 (March 30, 2022). Review of Finance, Available at SSRN: https://ssrn.com/abstract=3560919 or http://dx.doi.org/10.2139/ssrn.3560919

Chenyu Shan (Contact Author)

Shanghai University of Finance and Economics ( email )

100 Wudong Road
Shanghai
China

Dragon Yongjun Tang

The University of Hong Kong - Faculty of Business and Economics ( email )

KKL 1004
Pokfulam Road
Pokfulam
Hong Kong
(852)22194321 (Phone)

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