The Value of Employee Satisfaction in Disastrous Times : Evidence from COVID-19

Employee treatment is a dilemma for many business owners and executives: while everyone prefers a pleasant working environment, satisfying employee needs can be costly to shareholders. Given such costs, is it still worthwhile to make employees happy on a daily basis? This study provides evidence supporting a positive answer: firms with more satisfactory employees heading into the COVID-19 withstand the crisis better according to stock price reaction. Such outperformance by high-employee-satisfaction firms is more pronounced for financially weaker firms, for knowledge-based industries, and for FinTech-developed cities. Moreover, the result is not driven by state ownership, information asymmetry, or insider propping. Our findings show the importance of employee morale during crisis period and that firms can do well by doing good