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

The novel coronavirus (“COVID-19”) has severely affected the workplace, corporate activities, and share prices. Using a crowdsourced dataset from a FinTech company, we find that firms with higher employee satisfaction are more resilient to negative market-wide shocks during the COVID-19 outbreak. While many publicly listed companies in China suffered a record loss in stock value on February 3, 2020, the first trading day after the lockdown of Wuhan and other cities, firms with more satisfied employees experienced smaller stock price drops. This finding is robust to alternative measures and econometric methods. The role of employee satisfaction in withstanding the public health shock is more pronounced for firms that have more intangible assets or are in the knowledge-based industries. Overall, our findings suggest that employee morale is beneficial for shareholders during disastrous times.