Employee Satisfaction and Long-run Stock Returns, 1984-2020

Financial Analysts Journal, 78:3, 129-151

38 Pages Posted: 1 Oct 2021 Last revised: 27 Jul 2022

Date Written: September 30, 2021


Economic theory predicts that (in the absence of mispricing) the excess return to socially responsible businesses is negative in equilibrium. In contrast, using the state-of-art empirical models and a sample spanning four decades (1984-2020), an equal-weighted portfolio of companies that treat their employees the best earns an excess return of 2% to 2.7% per year. The estimated alphas are positive in most periods within the sample (with no upward or downward trend) and are particularly large during crisis periods. Overall, the results suggest that the stock market (still) undervalues employee satisfaction.

Keywords: Employee satisfaction, Business social responsibility, Socially responsible investing, Underreaction, Corporate culture

JEL Classification: G14, G38, J28, M14

Suggested Citation

Boustanifar, Hamid and Kang, Young Dae, Employee Satisfaction and Long-run Stock Returns, 1984-2020 (September 30, 2021). Financial Analysts Journal, 78:3, 129-151 , Available at SSRN: https://ssrn.com/abstract=3933687 or http://dx.doi.org/10.2139/ssrn.3933687

Hamid Boustanifar (Contact Author)

EDHEC Business School ( email )

393 Promenade des Anglais – BP 3116
Nice, 06202

Young Dae Kang

The Bank of Korea ( email )

Korea, Republic of (South Korea)

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