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

Employee treatment is an important but challenging element of corporate environmental, social, and governance (ESG) policies. Satisfying employee needs can increase corporate productivity, but is also costly to shareholders. Using unique data for Chinese publicly listed firms, we show that having satisfied employees is valuable to the firm. Specifically, firms with higher employee satisfaction scores withstand COVID-19 better, in terms of stock market performance. Such an effect is more pronounced for firms with more intangible assets and in knowledge-based industries. Moreover, higher employee satisfaction scores predict better operating performance. While not fully revealed in tranquil times, the effect of employee satisfaction is materialized when the firms experience negative shocks, such as COVID-19. Our findings suggest that firms can do well in crisis periods by doing good in normal times.