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Employee satisfaction and the cost of corporate borrowing

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  • Chi, Wentao
  • Chen, Yun

Abstract

This study identifies a channel through which stakeholders affect a firm's financing activities. We use employee reviews on Glassdoor.com, a major employer rating platform, to gauge the employee satisfaction of U.S.-listed firms. Using text-based sentiment measures based on 644,280 reviews over 11 years, we find the cost of debt financing is significantly higher for firms with low employee ratings and firms with negative employee sentiment in comments. The results are robust to a system GMM approach that alleviates endogeneity concerns. Our results suggest employee satisfaction improve financing conditions by signaling better growth potential and reducing agency conflicts with banks.

Suggested Citation

  • Chi, Wentao & Chen, Yun, 2021. "Employee satisfaction and the cost of corporate borrowing," Finance Research Letters, Elsevier, vol. 40(C).
    • Handle: RePEc:eee:finlet:v:40:y:2021:i:c:s1544612319314175
    DOI: 10.1016/j.frl.2020.101666
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    Cited by:

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    2. Becker, Mary & Cardazzi, Alexander & McGurk, Zachary, 2022. "Employee satisfaction and stock returns during the COVID-19 Pandemic," Journal of Behavioral and Experimental Finance, Elsevier, vol. 33(C).
    3. Yuanhui Li & Rongrong Chen & Erwei Xiang, 2022. "Corporate social responsibility, green financial system guidelines, and cost of debt financing: Evidence from pollution‐intensive industries in China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(3), pages 593-608, May.
    4. Mary Becker & Alexander Cardazzi & Zachary McGurk, 2021. "Employee satisfaction and stock returns during the COVID-19 Pandemic," Working Papers 21-02, Department of Economics, West Virginia University.
    5. Zhi Su & Danni Wu & Zhenkun Zhou & Junran Wu & Libo Yin, 2023. "The Impact of Customer Online Satisfaction on Stock Returns: Evidence from the E-commerce Reviews in China," Papers 2306.12119, arXiv.org.
    6. Martijn Hendriks & Martijn Burger & Harry Commandeur, 2023. "The influence of CEO compensation on employee engagement," Review of Managerial Science, Springer, vol. 17(2), pages 607-633, February.
    7. Panpan Fu & Seema Wati Narayan & Olaf Weber & Yonggang Tian & Yi-Shuai Ren, 2022. "Does Local Confucian Culture Affect Corporate Environmental, Social, and Governance Ratings? Evidence from China," Sustainability, MDPI, vol. 14(24), pages 1-18, December.

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    More about this item

    Keywords

    Employee satisfaction; Corporate social responsibility; User generated data; Stakeholder theory;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J59 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Other

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