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

Alex Edmans, Lucius Li and Chendi Zhang

No 20300, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: G12 G23 G38 J53 J81 J83 J88 K31 (search for similar items in EconPapers)
Date: 2014-07
Note: CF LE LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

Published as Alex Edmans & Darcy Pu & Chendi Zhang & Lucius Li, 2024. "Employee Satisfaction, Labor Market Flexibility, and Stock Returns Around the World," Management Science, vol 70(7), pages 4357-4380.

Downloads: (external link)
http://www.nber.org/papers/w20300.pdf (application/pdf)

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:nbr:nberwo:20300

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w20300

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().