Why Should You Invest in the Best
Companies to Work For?

Abstract

This article provides empirical evidence from the capital market that companies operating and competing in the knowledge-based and information-driven economy should be able to enjoy superior benefits and performance by making themselves the best companies to work for. The author analyzes stock risk premiums and risk-adjusted returns on a portfolio of firms ranked consecutively from 1998 to 2011 as the best companies to work for in the United States. The results show that an equal-weighted portfolio of these best companies exhibits positive average risk premiums and average risk-adjusted excess returns a majority of the time. The implication is that if firms take care to make their companies good places to work, it will pay off in the short and long runs, as evidenced from the capital market. Also, it is possible to construct a portfolio of such companies to earn positive average risk premiums and average risk-adjusted excess returns a majority of the time.

TOPICS: Security analysis and valuation, portfolio construction, performance measurement