Employee satisfaction and equity returns in Brazil
Published:
Jun 13, 2025
Volume:
23
Keywords:
Employee satisfaction
Great Place to Work
ESG
Impact on firm value
Abstract
Using the national list of the Best Companies to Work For in Brazil (Great Place to Work – GPTW) and B3 data from 2001 to 2023, we investigate the excess returns of portfolios composed of companies with higher employee satisfaction, applying the four-factor risk model of Carhart (1997). We find that these companies exhibit an annual excess return of approximately 6%, a result that is economically and statistically relevant. The evidence proves robust to different asset weighting methodologies, the control for outliers, and is further supported by placebo tests. Treating the 2017 Labor Reform as an exogenous shock to the relationship between employee satisfaction and firm value, we identify that abnormal returns are concentrated precisely in windows that start to include the surge in “Labor Reform” searches on Google Trends. Taken together, the results are consistent with the hypothesis that greater labor market flexibility enhances the positive effects of employee satisfaction on firm value and helps managers deal with recruitment, retention, and employee motivation.
How to cite
Eduardo Castellano, Jéfferson Augusto Colombo. Employee satisfaction and equity returns in Brazil. Brazilian Review of Finance, v. 23, n. 1, 2025. p. e202509. DOI: 10.12660/rbfin.v23n1.2025.93429.
References
Aboody, D. and Lev, B. (1998) The value relevance of intangibles: The case of software capitalization, Journal of Accounting Research, 36, 161–191.
Akerlof, G.A. (1982) Labor contracts as partial gift exchange, The Quarterly Journal of Economics, 97(4), 543–569.
Akerlof, G.A. and Yellen, J.L. (1986) Efficiency wage models of the labor market, Cambridge University Press.
Allen, D.G., Bryant, P.C. and Vardaman, J.M. (2010) Retaining talent: Replacing misconceptions with evidence-based strategies, Academy of Management Perspectives, 24(2), 48–64.
Barnes, S. and Cheng, Y. (2023) Employee approval of CEOs and firm value: Evidence from employees' choice awards, Journal of Corporate Finance, 78, 102341.
Barsade, S.G. and Gibson, D.E. (2007) Why does affect matter in organizations?, Academy of Management Perspectives, 21(1), 36–59.
Berk, J.B., Stanton, R. and Zechner, J. (2010) Human capital, bankruptcy, and capital structure, The Journal of Finance, 65(3), 891–926.
Bénabou, R. and Tirole, J. (2010) Individual and corporate social responsibility, Economica, 77(305), 1–19.
Cappelli, P. and Neumark, D. (2001) Do “high-performance” work practices improve establishment-level outcomes?, ILR Review, 54(4), 737–775.
Carhart, M.M. (1997) On persistence in mutual fund performance, The Journal of Finance, 52(1), 57–82.
Carvalho, S.S.d. (2017) Uma visão geral sobre a reforma trabalhista, Technical report, Instituto de Pesquisa Econômica Aplicada (Ipea).
Chan, L.K., Lakonishok, J. and Sougiannis, T. (2001) The stock market valuation of research and development expenditures, The Journal of Finance, 56(6), 2431–2456.
Cronqvist, H., Heyman, F., Nilsson, M., Svaleryd, H. and Vlachos, J. (2009) Do entrenched managers pay their workers more?, The Journal of Finance, 64(1), 309–339.
Deng, Z., Lev, B. and Narin, F. (1999) Science and technology as predictors of stock performance, Financial Analysts Journal, 55(3), 20–32.
Drucker, P. (2003) Sociedade pós-capitalista, 3 ed., Ed. Actual.
Drucker, P.F. (1974) Management: Tasks, responsibilities, practices, McGraw-Hill.
Drucker, P.F. (2008) O essencial de Drucker: Uma seleção das melhores teorias do pai da Gestão, ACTUAL.
Edmans, A. (2011) Does the stock market fully value intangibles? Employee satisfaction and equity prices, Journal of Financial Economics, 101(3), 621–640.
Edmans, A. (2012) The link between job satisfaction and firm value, with implications for corporate social responsibility, Academy of Management Perspectives, 26(4), 1–19.
Edmans, A. and Gabaix, X. (2011) The effect of risk on the CEO market, The Review of Financial Studies, 24(8), 2822–2863.
Edmans, A., Li, L. and Zhang, C. (2014) Employee satisfaction, labor market flexibility, and stock returns around the world, Technical report, National Bureau of Economic Research.
Edmans, A., Pu, D., Zhang, C. and Li, L. (2024) Employee satisfaction, labor market flexibility, and stock returns around the world, Management Science, 70(7), 4357–4380.
Faleye, O. and Trahan, E.A. (2006) Is What’s Best for Employees Best for Shareholders?, Technical Report 888180, SSRN.
Filbeck, G. and Preece, D. (2003) Fortune’s best 100 companies to work for in America: Do they work for shareholders?, Journal of Business Finance & Accounting, 30(5-6), 771–797.
Fisher, C.D. (2010) Happiness at work, International Journal of Management Reviews, 12(4), 384–412.
Fulmer, I.S., Gerhart, B. and Scott, K.S. (2003) Are the 100 best better? An empirical investigation of the relationship between being a “great place to work” and firm performance, Personnel Psychology, 56(4), 965–993.
Griffeth, R.W., Hom, P.W. and Gaertner, S. (2000) A meta-analysis of antecedents and correlates of employee turnover: Update, moderator tests, and research implications for the next millennium, Journal of Management, 26(3), 463–488.
Guimarães, B. (2015) A riqueza da nação no século XXI, BEĨ.
Guiso, L., Sapienza, P. and Zingales, L. (2015) The value of corporate culture, Journal of Financial Economics, 117(1), 60–76.
Ian Carlin, B. and Gervais, S. (2009) Work ethic, employment contracts, and firm value, The Journal of Finance, 64(2), 785–821.
Jensen, M.C. and Meckling, W.H. (1976) Theory of the firm: Managerial behavior, agency costs and ownership structure, Journal of Financial Economics, 3, 305–360.
Lau, R.S.M. and May, B.E. (1998) A win-win paradigm for quality of work life and business performance, Human Resource Development Quarterly, 9(3), 211–226.
Lev, B. and Sougiannis, T. (1996) The capitalization, amortization, and value-relevance of R&D, Journal of Accounting and Economics, 21(1), 107–138.
Levering, R. and Moskowitz, M. (1993) The Ten Best Companies to Work for in America, Business & Society Review, 85.
Levering, R., Moskowitz, M. and Katz, M. (1984) The hundred best companies to work for in America.
Ljungqvist, A. (2007) IPO underpricing, Handbook of Empirical Corporate Finance, pp. 375–422.
McGregor, D. (1960) The human side of enterprise, McGraw-Hill.
Oliveira, B.C.eKaio, E.K. (2015) Desempenho de ações de empresas brasileiras após seu IPO: Evidências de curto e de longo prazo, REGE, 22(2), 173–186.
Rajan, R.G. and Zingales, L. (1998) Power in a Theory of the Firm, The Quarterly Journal of Economics, 113(2), 387–432.
Rodrigues, M. (2017a) Por que a reforma trabalhista é tão impopular?, https://porque.com.br/por-que-reforma-trabalhista-e-tao-impopular (accessed 02 April 2025).
Rodrigues, M. (2017b) Quem ganha e quem perde com a reforma trabalhista?, https://porque.com.br/quem-ganha-e-quem-perde-com-a-reforma-trabalhista (accessed 02 April 2025).
Shapiro, C. and Stiglitz, J.E. (1984) Equilibrium unemployment as a worker discipline device, The American Economic Review, 74(3), 433–444.
Simon, D.H. and DeVaro, J. (2006) Do the best companies to work for provide better customer satisfaction?, Managerial and Decision Economics, 27(8), 667–683.
Thelen, K. (2001) Varieties of labor politics in the developed democracies, Varieties of Capitalism: The Institutional Foundations of Comparative Advantage, 71, 76–92.
Zingales, L. (2000) In search of new foundations, The Journal of Finance, 55(4), 1623–1653.