Can Firms Do Well While Doing Good?

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Another abstract contributes to the research of the 100 companies to work for is Ahmed, Nanda, & Schnusenberg (2010). This research aim to identify “Can Firms Do Well While Doing Good?” in term of applying to financial economic. They are looking at the relationship between a firm’s social responsibility and its performance. They argue that Fortune’s approach to identify the Best Companies to Work For is mainly based on employee (not shareholder) surveys, which may provide a more direct measure of the relationship between a firm’s degree of social responsibility and its financial performance. This research examine the stock market reaction to the announcement of Fortune magazine’s list of The 100 Best Companies to Work For over the…show more content…
By using regression analysis, Ahmed, Nanda, & Schnusenberg (2010) claim to find “significant positive excess returns has a positive relation to the job growth rate, but not to firm rank, on a pre-listing basis.” (p. 856). They applied multivariate regressions and single-variate of firm rank on selected pre-ranking financial variables. The difference in medians tests show significance levels for two-test Cross-sectional analysis. The research reveals that the firms with a more favorable ranking are relatively small and have a higher job growth rate, low employee turnover, high betas and extremely positive stock market performance prior to their inclusion on the list. Their results indicate that firms exhibiting a high degree of social responsibility towards their employees are positively rewarded by stock market participants, and that the rankings are somewhat related to pre- and post-survey financial performance (Ahmed, Nanda, & Schnusenberg, p. 850, 2010). Their report show consistent with the hypothesis that a positive reputation as an employer has value to a firm. The positive excess return to such firms indicates that attaining a good employer ranking can be viewed as a positive managerial action. The announcement could be providing the market information and assurance about managerial skills. A good reputation should allow a firm to attract talented employees and reduce employee turnover. The excess returns for our
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