Employee satisfaction and the cost of corporate borrowing

Abstract

This study identifies a channel through which stakeholders affect a firm's financing activities. We use employee reviews on Glassdoor.com, a major employer rating platform, to gauge the employee satisfaction of U.S.-listed firms. Using text-based sentiment measures based on 644,280 reviews over 11 years, we find the cost of debt financing is significantly higher for firms with low employee ratings and firms with negative employee sentiment in comments. The results are robust to a system GMM approach that alleviates endogeneity concerns. Our results suggest employee satisfaction improve financing conditions by signaling better growth potential and reducing agency conflicts with banks.