Return Cross-Predictability in Firms with Similar Employee Satisfaction

62 Pages Posted: 16 Oct 2019 Last revised: 20 Jul 2021

See all articles by Xueying Bian

Xueying Bian

Singapore Management University

Ran Chang

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Sergei Sarkissian

McGill University; University of Edinburgh

Jun Tu

Singapore Management University - Lee Kong Chian School of Business

Date Written: October 15, 2019

Abstract

This study uses Glassdoor data and finds that the returns of similar employee satisfaction (SES) firms predict focal firm returns. A long-short portfolio sorted on the lagged returns of SES firms yields the Fama-French six-factor alpha of 135 bps per month. The observed predictability is distinct from existing inter-firm momentum effects and cannot be explained by risk-based arguments. The return predictability across SES firms may reflect a new type of cross-firm link derived from the knowledge spillovers about employee welfare policies via social transmissions (e.g., personal interchange among employees from different firms).

Keywords: Employee satisfaction, Return predictability, Investors’ inattention, Knowledge spillover, Social transmissions

JEL Classification: G11, G14, G15

Suggested Citation

Bian, Xueying and Chang, Ran and Sarkissian, Sergei and Tu, Jun, Return Cross-Predictability in Firms with Similar Employee Satisfaction (October 15, 2019). Available at SSRN: https://ssrn.com/abstract=3469633 or http://dx.doi.org/10.2139/ssrn.3469633

Xueying Bian

Singapore Management University ( email )

Li Ka Shing Library
70 Stamford Road
Singapore 178901, 178899
Singapore

Ran Chang (Contact Author)

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.1954 Huashan Road
Shanghai Jiao Tong University
Shanghai, 200030
China

Sergei Sarkissian

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
514-398-4876 (Phone)
514-398-3876 (Fax)

HOME PAGE: http://sergei-sarkissian.com

University of Edinburgh

29 Buccleuch Pl.
Edinburgh, Scotland EH8 9JS
United Kingdom

Jun Tu

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
#04-01
Singapore, 178899
Singapore

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