Good companies to work for are also good companies to invest in, according to new research by Alex Edman of the Wharton School, University of Pennsylvania. In a recent paper, Edmans says there is a direct positive correlation over the long term between employee satisfaction and stock market returns for the companies they work for. In fact, it’s a positive alpha of 4 per cent for his study of 100 companies between 1984 and 2005.
Edmans says the three main implications of the findings are: employee satisfaction need not represent excessive non-pecuniary compensation; the stock market does not fully value intangibles; and, socially responsible investing screens may improve investment returns.
