Does Company Culture Pay Off? Analyzing Stock Performance of “Best Places to Work” Companies

This study conducted three tests to evaluate how company culture and stock performance might be linked. This includes:

• Whether companies on Glassdoor’s “Best Places to Work” list and Fortune’s 100 “Best Companies to Work For” list outperform the overall stock market through three possible portfolios.
• Whether being named to the annual Glassdoor list affects short-term stock prices.
• Whether being low rated according to company reviews on Glassdoor is associated with lower stock returns than the overall stock market.

Key Findings

• Based on three different portfolios, we find companies named to Glassdoor’s “Best Places to Work” list broadly outperformed the S&P 500 from 2009 to 2014. A simple portfolio of each new class of winners exhibits higher returns than the overall market in 5 out of the past 6 years.
• Since 2009, a portfolio of Fortune’s “Best Companies to Work For” companies outperformed the S&P 500 by 84.2 percent, while a similar portfolio of Glassdoor’s “Best Places to Work” outperformed the overall market by 115.6 percent.
• Using a method known as an “event study” we find being named a “Best Place to Work” leads to a roughly 0.75 percent jump in stock returns during the ten days after the announcement—a small but statistically significant effect.
• As a robustness check, we examined stock returns among public companies with the lowest employee ratings on Glassdoor. We find a portfolio of the 30 lowest-rated public companies on Glassdoor broadly underperformed the market from 2009 to 2014.
• These results suggest an important economic link between company intangibles, such as employee satisfaction, and broader financial performance among large publicly held companies.