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Theory predicts negative excess return for socially responsible businesses. This study applies state-of-art empirical models to a portfolio of companies that treat their employees best and finds that such companies generate positive excess return.


Economic theory predicts that (in the absence of mispricing) the excess return to socially responsible businesses is negative in equilibrium. In contrast, using the state-of-art empirical models and a sample spanning four decades (1984–2020), an equal-weighted portfolio of companies that treat their employees the best earns an excess return of 2% to 2.7% per year. The estimated alphas are positive in most periods within the sample (with no upward or downward trend) and are particularly large during crisis periods. Overall, the results suggest that the stock market (still) undervalues employee satisfaction.

About the Authors

Hamid Boustanifar

Hamid Boustanifar is an associate professor of finance at EDHEC Business School, France.

Young Dae Kang

Young Dae Kang is a financial economist at the Bank of Korea.