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

Wednesday 29 November 2017, 1.00PM to 2.00pm

Speaker(s): Chendi Zhang (Warwick)

Abstract: We study the relationship between employee satisfaction and firm performance around the world, using lists of the “Best Companies to Work For” in 14 countries. Employee satisfaction is associated with superior long-run returns, current valuation ratios, future profitability, and earnings surprises in flexible labor markets, such as the US and UK, but not rigid labor markets, such as Germany. These results are consistent with employee satisfaction improving recruitment, retention, and motivation in flexible labor markets, where firms face fewer constraints on hiring and firing and employees have greater ability to respond to higher satisfaction. In rigid labor markets, legislation already provides minimum standards for worker welfare and so additional expenditure may exhibit diminishing returns. The findings have implications for the differential profitability of socially responsible investing strategies around the world – in particular, the importance of considering institutionalfactors when forming such strategies.

Location: ARRC Auditorium (A/RC014)

Admission: All welcome