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

TLDR

Job satisfaction has been hypothesized to influence firm value, but the precise relationship remains unclear. The study aims to examine the link between job satisfaction and firm value using a novel finance-based methodology. The authors analyze firm-level value by measuring future stock returns while controlling for risk, firm characteristics, industry performance, and outliers, focusing on firm-level rather than employee-level productivity to account for the cost of raising job satisfaction. Companies listed among the “100 Best Companies to Work For in America” earned 2.3%–3.8% higher annual stock returns than peers from 1984–2011, supporting that job satisfaction boosts firm value, that CSR can enhance returns, and that the market undervalues intangible assets, suggesting a need to shield managers from short‑term pressures.

Abstract

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.