Does The Stock Market Fully Value Intangibles? Employee Satisfaction And Equity Prices

Date Added: Jun 2009
Format: PDF

This paper analyzes the relationship between employee satisfaction and long-run stock returns. A portfolio of the "100 Best Companies to Work For in America" earned an annual four-factor alpha of 4% from 1984-2005. The portfolio also outperformed industry- and characteristics-matched benchmarks, and the results are robust to the removal of outliers and other methodological changes. Returns are even more significant in the 1998- 2005 sub-period, even though the list was widely publicized by Fortune magazine. The Best Companies also exhibited significantly more positive earnings surprises and stronger earnings announcement returns.