Engaged Employees Deliver Returns: Evidence on Financial Performance from Spain

Abstract

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Does investing in your employees create long-term value? Although many firms pursue employee-focused policies, studies show little agreement on which specific dimensions of employee satisfaction yield sustainable financial performance. Building on Edmans (2011), who linked employee satisfaction to superior stock performance in the United States, this study turns to the Spanish market. Using 15 years of data from Actualidad Económica—Spain’s most recognized benchmark for employee satisfaction—we apply Herzberg’s (1968) two-factor theory to distinguish between motivators, such as sense of belonging, talent management, and training, and hygiene factors, like compensation and work environment. Applying a Carhart (1997) four-factor model, we find that only motivator dimensions are consistently associated with significant risk-adjusted excess returns. Notably, companies scoring highest in sense of belonging deliver annual excess returns exceeding 10%, reinforcing the financial materiality of employee beliefs and identification with the organization. This result is consistent with findings by Gartenberg et al. (2019). In contrast, hygiene factors (i.e., compensation and work environment) show limited effects on long-term performance. These findings suggest that the path to sustained financial value lies in fostering cultural alignment, meaningful connection, and developmental opportunities at work, rather than focusing on buying talent or having the most employee-friendly policies.