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Employee Satisfaction, Firm Value and Firm Productivity

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  • Roger Best

    () (University of Central Missouri)

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    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.

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    File URL: http://faculty.ucmo.edu/econfinpapers/wpaper/wp0806.pdf
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    Bibliographic Info

    Paper provided by University of Central Missouri, Department of Economics & Finance in its series Working Papers with number 0806.

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    Length: 23 pages
    Date of creation: May 2008
    Date of revision: May 2008
    Handle: RePEc:umn:wpaper:0806

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    Web page: http://www.ucmo.edu/econ
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    Keywords: Employee satisfaction; firm value; firm productivity;

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    1. Wadhwani, S. & Wall, M., 1988. "A Direct Test Of The Efficiency Wage Model Using Uk Micro- Data," Papers 313, London School of Economics - Centre for Labour Economics.
    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 1102-15, 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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