Employee satisfaction and firm value: crowd-sourced evidence from Korea

Abstract

This study examines the impact of employee satisfaction on firm value in Korea, leveraging local company review data. Based on the concept of 'wisdom of the crowd,' empirical evidence using crowdsourced data from Jobplanet reveals that firms with higher employee satisfaction experience positive changes in Tobin's Q in the lead quarter, with this influence lasting up to two quarters. In addition, Fama & MacBeth's (1973) regression analysis shows that firms with higher employee satisfaction experience significantly positive stock returns over the following two quarters. With changes in Tobin's Q and future stock returns as dependent variables, the results of the cross-sectional analysis show that the effect of employee satisfaction on firm value is more pronounced for firms with higher foreign ownership and those audited by Big 4 accounting firms. Moreover, firms with higher employee satisfaction are more likely to have positive cumulative abnormal returns surrounding the earnings announcement period. Finally, the findings remain consistent and robust upon additional analyses, including using operating performance measures and applying a stringent criterion for the minimum number of reviews each quarter. Using crowdsourced employee review data from Korea, this study highlights the critical role of labor quality in enhancing corporate value and the efficacy of stakeholder capitalism in the Korean stock market.