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Employee Satisfaction, Firm Value and Firm Productivity

Author

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  • Roger Best

    (University of Central Missouri)

Abstract

We examine whether self-reported employee satisfaction is associated with higher firm valuation and productivity. Using a sample of firms from Fortune magazine’s list of "100 Best Companies to Work For", companies in which employees report high levels of satisfaction, we find that these firms have valuations that are significantly greater than both their respective industry medians and matched firms. The firms in our sample also exhibit greater levels of productivity and efficiency. Thus, successful efforts in increasing employee satisfaction appear to enhance overall firm productivity, which is subsequently rewarded by investors through higher equity values.

Suggested Citation

  • Roger Best, 2008. "Employee Satisfaction, Firm Value and Firm Productivity," Working Papers 0806, University of Central Missouri, Department of Economics & Finance, revised May 2008.
    • Handle: RePEc:umn:wpaper:0806
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    File URL: http://faculty.ucmo.edu/econfinpapers/wpaper/wp0806.pdf
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    References listed on IDEAS

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    1. Wadhwani, Sushil B & Wall, Martin, 1991. "A Direct Test of the Efficiency Wage Model Using UK Micro-data," Oxford Economic Papers, Oxford University Press, vol. 43(4), pages 529-548, October.
    2. Levine, David I, 1992. "Can Wage Increases Pay for Themselves? Tests with a Production Function," Economic Journal, Royal Economic Society, vol. 102(414), pages 1102-1115, September.
    3. Snipes, Robin L. & Oswald, Sharon L. & LaTour, Michael & Armenakis, Achilles A., 2005. "The effects of specific job satisfaction facets on customer perceptions of service quality: an employee-level analysis," Journal of Business Research, Elsevier, vol. 58(10), pages 1330-1339, October.
    4. Filbeck, Greg, 2001. "Mother Jones: Do better places to work imply better places to invest?," Review of Financial Economics, Elsevier, vol. 10(1), pages 57-70.
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    Cited by:

    1. Zenu Sharma & Weihua Huang, 2014. "When do pay spreads influence firm value?," Applied Financial Economics, Taylor & Francis Journals, vol. 24(11), pages 723-737, June.
    2. Schrade, Peter, 2018. "The impact of leadership behaviour factors on work productivity: Measuring the impact of factors of the full range leadership model and the leadership task model," Journal of Applied Leadership and Management, Hochschule Kempten - University of Applied Sciences, Professional School of Business & Technology, vol. 6, pages 66-88.

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    More about this item

    Keywords

    Employee satisfaction; firm value; firm productivity;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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