Information Content of Employee Satisfaction in Predicting Future Earnings：（信息内容的员工满意度预测未来收益）.pdfVIP

INFORMATION CONTENT OF EMPLOYEE SATISFACTION IN PREDICTING FUTURE EARNINGS Rajiv D. Banker Constantine Konstans The University of Texas at Dallas Raj Mashruwala Washington University Last revised: July 31, 2001 INFORMATION CONTENT OF EMPLOYEE SATISFACTION IN PREDICTING FUTURE EARNINGS Abstract: The use of nonfinancial measures in performance evaluation has been justified based on these measures being lead indicators of financial performance. But, in doing so, it is important to control for the information content of measures of past financial performance. Using data from more than 500 stores of a retail chain, we use two approaches to examine the incremental information content of employee satisfaction in predicting future earnings. The first approach uses momentum accounting theory to model and estimate the direct relationship between employee satisfaction, customer satisfaction and earnings. The second approach uses managers’ revealed choices of stores for closure to infer their reliance on employee satisfaction and customer satisfaction in predicting future store earnings. The results indicate that employee satisfaction has significant incremental information content in predicting store profitability. But the information content of employee satisfaction is shown to be contextual and sensitive to the urban or rural location of the store. Key Words: Nonfinancial performance measures, Employee satisfaction, Customer satisfaction, Momentum accounting, Retail industry, Department stores, Earnings prediction. Data Availability: The confidentiality agreement with