Do Satisfied Employees Lead To Better Financial Performance?

  • Shahriar Saadullah Qatar University, Doha
  • Zabihollah Rezaee niversity of Memphis
Keywords: Employee  Satisfaction, Social Responsibility, Market Performance, Financial Performance

Abstract

This paper analyzes whether companies with satisfied employees yield better long term financial performance than comparable  companies and whether the market values.employee satisfaction. We compare the Industry Adjusted Return on Assets (ROA) and Return on Equity (ROE) of the Fortune  100  Best  Companies  to  Work  for  from  1998­2003 with  the  ROA  and  ROE of comparable companies.  We do not find that the Fortune 100 Best Companies to Work for yield  a  higher return  than  comparable  companies.    Also, using  the  list  of  the  Fortune  100  Best  Companies  to  Work for  From  2002­2007,  we  test  the  market  reaction  by  using the  market  event  methodology  of  estimating  Cumulative Abnormal  Return  (CAR)  around  the  date  of  public announcement  of  the  list.  We  find  that  the  market  reacts positively  during  periods  of  economic  growth,  which  is consistent with the prior literature. However, we do not find any  significant  positive  or  negative  market  reaction  during economic  downturn.  This  study  adds  to  the  literature concerning  issues  surrounding  employee  satisfaction, Human Resources practices as one dimension of Corporate Social  Responsibility  (CSR)  and  organizations'  financial performance.

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Published
2012-06-01
Issue
Vol 5 (2012)
Section
Articles
Copyright (c) 2012 Shahriar Saadullah, Zabihollah Rezaee

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