AgPa #52: Happier Employees, Better Returns?
Employee Satisfaction and Long-Run Stock Returns, 1984–2020 (2022)
Hamid Boustanifar, Young Dae Kang
Financial Analysts Journal 78(3), URL/SSRN
A common sales-pitch of ESG strategies is the idea that those strategies not only do good for the planet and other stakeholders, but also generate higher returns. I am generally skeptic about this, but there are studies showing that certain ESG variables historically indeed predicted higher returns. A prominent example for this is the paper on employee satisfaction by Alex Edmans (2011). This week’s AGNOSTIC Paper is an out-of-sample test of this study with somewhat more thorough testing.
- “Best Companies” outperformed several benchmarks
- “Best Companies” outperformed during crises and out-of-sample
- Quality and Low-Risk factors explain some of the premium on “Best Companies”