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

Chendi Zhang, Alex Edmans and Lucius Li

No 10066, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: Employee satisfaction; Labor market flexibility; Socially responsible investing; Corporate social responsibility (search for similar items in EconPapers)
JEL-codes: G12 G23 G38 J53 J81 J83 J88 K31 (search for similar items in EconPapers)
Date: 2014-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

Downloads: (external link)
https://cepr.org/publications/DP10066 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Employee Satisfaction, Labor Market Flexibility, and Stock Returns Around the World (2024)
Working Paper: Employee Satisfaction, Labor Market Flexibility, and Stock Returns Around The World (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:10066

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP10066

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().