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Journal of Corporate Finance Vol. 50 2018

Does it pay to treat employees well? International evidence on the value of employee-friendly culture

Larry Fauver1; Michael B. McDonald2; Alvaro G. Taboada3

1 University of Tennessee at Knoxville · 2 Fairfield University · 3 Mississippi State University

Abstract

We examine the valuation impact of an employee-friendly (EF) culture. Using a sample of 3446 firms from 43 countries for the period 2003 to 2014, we show that firms with a more EF culture are valued higher and perform better (ROA, ROE). Consistent with the good governance view, the impact is stronger for firms in countries with better investor protection and for firms with better governance and lower agency costs. We further document a positive valuation associated with the enactment of laws aimed at improving parental leave policies. The impact on valuation stems from improved technical efficiency. Using various approaches, our results suggest that the impact of an EF culture on firm value is causal.

DOI
10.1016/j.jcorpfin.2018.02.003
Volume
50
Pages
84-108
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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