NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Employee Satisfaction, Labor Market Flexibility, and Stock Returns Around The World

Alex Edmans, Lucius Li, Chendi Zhang

NBER Working Paper No. 20300
Issued in July 2014
NBER Program(s):   CF   LE   LS

We study the relationship between employee satisfaction and abnormal stock returns around the world, using lists of the "Best Companies to Work For" in 14 countries. We show that employee satisfaction is associated with positive abnormal returns in countries with high labor market flexibility, such as the U.S. and U.K., but not in countries with low labor market flexibility, such as Germany. These results are consistent with high employee satisfaction being a valuable tool for recruitment, retention, and motivation in flexible labor markets, where firms face fewer constraints on hiring and firing. In contrast, in regulated labor markets, legislation already provides minimum standards for worker welfare and so additional expenditure may exhibit diminishing returns. The results have implications for the differential profitability of socially responsible investing ("SRI") strategies around the world. In particular, they emphasize the importance of taking institutional features into account when forming such strategies.

download in pdf format
   (208 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20300

Users who downloaded this paper also downloaded* these:
Glaeser, Gottlieb, and Ziv w20291 Unhappy Cities
Bianchi and Bigio w20490 Banks, Liquidity Management and Monetary Policy
Carroll, Choi, Laibson, Madrian, and Metrick w11074 Optimal Defaults and Active Decisions
Woodford w22285 Quantitative Easing and Financial Stability
Gentzkow, Shapiro, and Taddy w22423 Measuring Polarization in High-Dimensional Data: Method and Application to Congressional Speech
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us