16 June 2022 Financial Analysts Journal Volume 78, Issue 3

Employee Satisfaction and Long-Run Stock Returns, 1984–2020

  1. Hamid Boustanifar
  2. Young Dae Kang
Economic theory predicts negative excess return for socially responsible businesses. This study applies state-of-art empirical models to a portfolio of companies that treat their employees best and finds that such companies generate positive excess return.
Read the Complete Article in the Financial Analysts Journal CFA Institute Member Content


Economic theory predicts that (in the absence of mispricing) the excess return to socially responsible businesses is negative in equilibrium. In contrast, using state-of-art empirical models and a sample spanning four decades (1984–2020), an equal-weighted portfolio of companies that treat their employees the best earns an excess return of 2% to 2.7% per year. The estimated alphas are positive in most periods within the sample (with no upward or downward trend) and are particularly large during crisis periods. Overall, the results suggest that the stock market (still) undervalues employee satisfaction.

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