Happy workers make investors happy too

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.

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