The Link Between Job Satisfaction and Firm Value, With Implications for Corporate Social Responsibility

Executive Overview How are job satisfaction and firm value linked? I tackle this long-standing management question using a new methodology from finance. I study the effect on firm-level value, rather than employee-level productivity, to take into account the cost of increasing job satisfaction. To address reverse causality, I measure firm value by using future stock returns, controlling for risk, firm characteristics, industry performance, and outliers. Companies listed in the “100 Best Companies to Work For in America” generated 2.3% to 3.8% higher stock returns per year than their peers from 1984 through 2011. These results have three main implications. First, consistent with human resource management theories, job satisfaction is beneficial for firm value. Second, corporate social responsibility can improve stock returns. Third, the stock market does not fully value intangible assets, and so it may be necessary to shield managers from short-term stock prices to encourage long-run growth.