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5 November 2007
New Study on Employee Satisfaction and Long-Run Stock Performance Wins 2007 Moskowitz Prize for SRI Research
Source: www.haas.berkeley.edu
Berkeley CA - The 2007 Moskowitz Prize for Socially Responsible Investing has been awarded to a new study demonstrating that companies with high employee satisfaction have historically also demonstrated superior stock performance.
The winning paper – "Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices" – by Alex Edmans of the University of Pennsylvania’s The Wharton School explores the relationship between employee satisfaction and long-run stock performance by reviewing a portfolio of stocks selected by Fortune magazine as the “Best Companies to Work For in America” in 1998. The study finds the portfolio earned more than double the market return by the end of 2005, in addition to outperforming industry- and characteristics-matched benchmarks.
These findings have two main implications. First, they suggest that employee satisfaction improves corporate performance rather than representing inefficiently excessive compensation. Second, they imply that the stock market does not fully value intangibles, even when they are made visible by a publicly available survey. Full text of the 2007 winning paper is available online at Social Science Network: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=985735.
“Many studies have shown that social investors can earn competitive returns. But this is one of the first studies to suggest that there could be a performance benefit to owning companies with certain positive characteristics,” said Lloyd Kurtz, Moskowitz Prize administrator and senior portfolio manager at Nelson Capital Management, an investment advisory affiliate of Wells Fargo.
Awarded by the Center for Responsible Business at the Haas School of Business, in cooperation with the Social Investment Forum, the Prize promotes the concept, practice, and growth of socially responsible investing.
With more than 30 papers under consideration from prominent researchers all over the world, this was the toughest field the judging panel has seen in the history of the Prize.
“Edmans'' paper was well-written and well-researched, and the judges felt that the paper was a wonderful addition to the socially responsible research body of knowledge,” added Brian Bruce, Professor and Director of the Finance Institute at Southern Methodist University’s Cox School of Business, and chair of the Moskowitz Prize judging committee.
Honorable mention was also awarded to Allen Goss of Ryerson University’s Ted Rodgers School of Management in Canada for his paper “Corporate Responsibility and Financial Distress”. Goss’ study finds that the level of corporate social responsibility (CSR) in a firm, proxied by KLD scores, is a significant determinant of distress, which suggests there is extra informational value in the metrics used by CSR advocates.
The sponsors of the Moskowitz Prize are: Calvert Group, First Affirmative Financial Network, Nelson Capital Management, Rockefeller and Co., and Trillium Asset Management.
For more information, visit the Moskowitz Research Program: http://www.haas.berkeley.edu/responsiblebusiness/MoskowitzResearchProgram.html.
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New Study on Employee Satisfaction and Long-Run Stock Performance Wins 2007 Moskowitz Prize for SRI Research
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