The Employee Is Always Right: Employee Satisfaction and Corporate Performance in Brazil

Alexandre Di Miceli Da Silveira

doi:10.1590/1982-7849rac2019190224

Abstract

Abstract I investigate the effect of employee satisfaction on corporate performance based on an extensive dataset of 114,004 online reviews of Brazil’s 1,000 largest listed and unlisted firms from 2013 to 2018 posted at a local subsidiary of Glassdoor. I find that overall employee satisfaction is positively associated with firm performance and that this relationship is likely to be economically relevant. Among the four dimensions of employee well-being, the link with performance is most evident for the dimension on culture, followed by career opportunities. On the other hand, the dimension on compensation and benefits was the least connected with firm performance. Taken together, these results support the view that intrinsic motivators are more relevant for superior performance than extrinsic ones popularized by the carrot and stick approach to management. I also find that the influence of employee satisfaction on performance is likely to be asymmetrical, in the sense that workplaces characterized by low satisfaction among workers are more likely to lead to poor performance than best-in-class companies are likely to produce superior performance. To my knowledge, this is the first paper to document an asymmetrical link between firm value and employee satisfaction, as well the first one to investigate this issue in an emerging economy using online reviews.

Highlights

How important is employee satisfaction for the performance of firms? this is a critical issue for the way companies are managed and governed, empirical research in corporate finance to investigate this question has been surprisingly scarce so far
Because employee welfare is typically one aspect considered in ESG (Environmental, Social, and Corporate Governance) assessments conducted by institutional investors for capital allocation decisions, this paper further contributes to the link between ESG standards and firm performance by showing that employees’ online reviews are a value relevant source of information for investors
I provide evidence of a positive and economically significant link between firm value and employee satisfaction in an emerging economy using online reviews posted at a local subsidiary of Glassdoor

Summary

Introduction

How important is employee satisfaction for the performance of firms? this is a critical issue for the way companies are managed and governed, empirical research in corporate finance to investigate this question has been surprisingly scarce so far. The fifth result comes from an analysis in which companies have been segregated in quartiles based on their employee ratings In this case, the regressions suggest that workplaces characterized by low levels of employee satisfaction destroy significant firm value, while the opposite is not necessarily true in the case of companies that positively stand out in satisfying their employees. Because employee welfare is typically one aspect considered in ESG (Environmental, Social, and Corporate Governance) assessments conducted by institutional investors for capital allocation decisions, this paper further contributes to the link between ESG standards and firm performance by showing that employees’ online reviews are a value relevant source of information for investors.

Literature Review

Methodology

Results

Method

Conclusion