Edmans, Li, and Zhang (2017)
Edmans, Alex, Lucius Li, and Chendi Zhang. “Employee Satisfaction, Labor Market Flexibility, and Stock Returns Around The World.” European Corporate Governance Institute (ECGI) - Finance Working paper No. 433/2014. February 22, 2017.
From authors' abstract: "We study the relationship between employee satisfaction and firm performance around the world, using lists of the “Best Companies to Work For” in 14 countries. Employee satisfaction is associated with superior long-run returns, current valuation ratios, future profitability, and earnings surprises in flexible labor markets, such as the US and UK, but not rigid labor markets, such as Germany... The findings have implications for the differential profitability of socially responsible investing strategies around the world – in particular, the importance of considering institutional factors when forming such strategies."
LK comment: Strong paper. An earlier draft received a Moskowitz Prize Honorable Mention in 2014. Builds on Edmans’ earlier work, which focused on the U.S. market.