Effect of Corporate Environment Social and Governance Reputation on Employee Turnover

51 Pages Posted: 20 Aug 2023

See all articles by Ming Leung

Ming Leung

University of California, Irvine - Paul Merage School of Business

Chuchu Liang

University of California, Irvine - Paul Merage School of Business

Ben Lourie

University of California, Irvine

Chenqi Zhu

University of California, Irvine - Paul Merage School of Business

Date Written: December 7, 2020

Abstract

We investigate how a firm’s environmental, social, and governance (ESG) reputation, as measured by the ESG sentiment of news articles, affects employee turnover. We theorize that, because employees derive self-esteem from having an employer with a positive ESG reputation, firms with better public ESG reputations should realize lower turnover. Furthermore, because women derive more benefit from prosocial behavior than men, we expect that retention rates among female employees at firms with better ESG reputations will be higher than those among male employees. Regression analyses on a firm-month panel of 1,822 publicly listed US firms from 2008 to 2018 reveal that a better public ESG reputation is associated with lower employee turnover and, confirming our proposed mechanism, this effect is stronger among female employees. Females respond to the reputation of both HR-specific ESG efforts (which primarily target employees) and non-HR-specific ESG efforts (which primarily target those outside the firm), while male employees are only affected by HR-specific ESG reputation. ESG reputation affects both men and women in states that have more Democratic voters. These analyses underscore the prosocial mechanism driving our predictions. Contributions to the strategic implications of ESG investments, employee turnover, and workforce diversity are identified.

Keywords: Environment, social and governance; reputation; employee turnover

JEL Classification: M10, M54

Suggested Citation

Leung, Ming and Liang, Chuchu and Lourie, Ben and Zhu, Chenqi, Effect of Corporate Environment Social and Governance Reputation on Employee Turnover (December 7, 2020). Available at SSRN: https://ssrn.com/abstract=4546035 or http://dx.doi.org/10.2139/ssrn.4546035

Ming Leung (Contact Author)

University of California, Irvine - Paul Merage School of Business

Paul Merage School of Business
Irvine, CA California 92697-3125
United States

Chuchu Liang

University of California, Irvine - Paul Merage School of Business ( email )

Irvine, CA California 92697
United States

Ben Lourie

University of California, Irvine ( email )

Irvine, CA 92697-3125
United States

Chenqi Zhu

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States

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