Employee Satisfaction

How Investing in Intangibles -- Like Employee Satisfaction -- Translates into Financial Returns: Knowledge@Wharton (http://knowledge.wharton.upenn.edu/article.cfm?articleid=1873)

How Investing in Intangibles -- Like Employee Satisfaction -- Translates into Financial Returns

Published : January 09, 2008 in Knowledge@Wharton

Contrary to management theories developed in the Industrial Age, employee satisfaction is an important ingredient for financial success, according to a new research paper by Wharton finance professor Alex Edmans. His findings also challenge the importance of short-term financial results and may have implications for investors interested in targeting socially responsible companies. In a paper titled, "Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices," Edmans examines the stock returns of companies with high employee satisfaction and compares them to various benchmarks -- the broader market, peer firms in the same industry, and companies with similar characteristics. His research indicates that firms cited as good places to work earn returns that are more than double those of the overall market.

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