GREAT PLACES TO WORK ®:

RESILIENCE IN TIMES OF CRISIS

A N A C A R VA L H O A N D N E L S O N A R E A L

We study the resilience of the “100 Best Companies to Work for in America” in
times of financial crisis by analyzing their long-term financial performance. Apart
from implementing methods that tackle the statistical problems of stock returns,
we use a conditional model to measure financial performance in periods of mar-
ket growth (bull markets) and market downturn (bear markets). We find that best
places to work are indeed resilient in times of crisis since neither their finan-
cial performance nor their systematic risk are affected during bear markets: top
companies continue to outperform the market during periods of crisis, and the
performance of lower-ranked great workplaces does not deteriorate. Moreover,
we find that previous studies were overestimating performance, and only great
workplaces on the top half of the rankings exhibit positive excessive returns.
© 2015 Wiley Periodicals, Inc.

Keywords: employee relations, best employer awards, financial performance,

financial crises, bull and bear markets

T
he “100 Best Companies to Work for
in America” list has been published for
over 25 years. The very first list was pub-
lished in 1984 in the book by Levering,
Moskowitz, and Katz. In 1993, the list
was updated in a similar book by Levering and
Moskowitz. Since 1998, Fortune magazine has
published the lists produced annually by the
Great Place to Work® Institute, which rank the
100 Best Companies to Work For according to
their own five dimensions of credibility, respect,
fairness, pride, and camaraderie. The ranking of
workplaces is two-thirds based on “employees’
responses to a randomly distributed employee
survey, which is taken anonymously and is a
representative sample of each company’s popu-
lation,” complemented by the analysis of the
company’s programs and practices (Great Place to
Work® Institute, 2011a).
The attraction of this distinction is the expec-
tation that companies that develop and maintain
good employee relations will reap particular advan-
tages. The benefits announced by the Great Place
to Work® Institute themselves comprise reduced
voluntary turnover, higher profits, and superior
stock market returns compared to major reference
indices. They also claim, “When times are tough,
employees at great workplaces show the resiliency
to pull through” (Great Place to Work® Institute,
2011b). This statement implies that not only are
best places to work more successful in general, but
also that they are especially resilient in periods of
crisis.
Although the claims of increased market
performance have been previously studied, this
peculiar capacity to withstand crises has not.
Evidence from the human resource management
(HRM) literature suggests that best employers
might be better prepared to resist crises. Other
studies show that particularly reputable firms are
somewhat shielded from market crashes. In this
article, we examine the financial performance of

Correspondence to: Ana Carvalho, University of Minho, School of Economics and Management, 4710-057 Braga,
Portugal, Phone: +351 253604510, Fax: +351 253601380, E-mail: anac@eeg.uminho.pt

Human Resource Managementt, May–June 2016, Vol. 55, No. 3. Pp. 479–498
© 2015 Wiley Periodicals, Inc.
Published online in Wiley Online Library (wileyonlinelibrary.com).
DOI:10.1002/hrm.21676
480 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2016
great workplaces during periods of crisis. In order
to test their resilience in tough times, we assess
their financial performance under different mar-
ket conditions, namely, during periods of market
growth (bull markets) and in periods of market
decline (bear markets). The methods we use also
allow us to refine the results of previous studies
by relying on more robust statistical methods and
financial performance measures.
Previous Studies on the Financial Impact of
Best Places to Work
There have been at least seven studies to specifically
examine the impact on financial performance of
being one of the “100 Best Companies to Work for
in America.” Table I summarizes the data, meth-
ods, and findings of previous studies concerning
this matter. The oldest is an event study by Hannon
and Milkovitch (1996), who tested the effect on
share prices of the announcement, in May 1984,
of this list. They found no significant impact. Later
studies, however, obtained different results. Lau
and May (1998) compared the 1993 list of great
workplaces with the Standard & Poor’s (S&P) 100
and found that the former showed higher sales
and asset growth, as well as higher profitability (as
measured by return on assets), for data from 1990
to 1994. Fulmer, Gerhart, and Scott (2003) found
that firms on this list generally do better than a
comparable group in terms of return on assets and
market-to-book ratios (using the 1998 ranking
and financial data from 1995 to 2000). They also
found that they substantially outperform the mar-
ket for cumulative (long-period) returns but not
consistently for annual returns. Filbeck and Preece
(2003) obtained similar results on the same 1998
list, using daily stock market data, ranging from
1987 to 1999. They carried out an event study for
the announcement of the list, concluding that
receiving this award acts as a positive signal to the
market. Fulmer et al. (2003, p. 986) surmised that
these firms “are able to create attractive workplaces
without hurting the bottom-line” and sometimes
even outperform the market. Ballou, Godwin, and
Shortridge (2003) examined the market values of
firms ranked in the 1998 to 2001 lists, controlling
for book value, past operational performance, and
research and development expense. They found
that companies ranked higher up on the list had
higher market value, supporting the notion that
the better the organizational climate and posi-
tive employee attitudes, the greater the financial
impact. Faleye and Trahan (2011) performed a
similar study on the 1998 to 2005 lists and found
evidence of abnormal excess returns both in reac-
tion to the announcements of the lists and for
long-term cumulative returns.
Edmans (2011) used more sophisticated finan-
cial measures to demonstrate that great work-
places generate superior long-term returns, even
when controlling for industries, factor risks, or
firm characteristics. He also used the more com-
plete set of data yet, comprising the 1984 and
1993 lists, and the annual rankings from 1998
to 2009. Edmans also found evidence of positive
excess returns and concluded that the markets do
not adequately value intangible assets, such as
superior employee relations, even when certified
by an independent institution and abundantly
publicized. He proposed that this is especially
true of intangible assets, the rewards of which are
long term in reach, as is the case of being a great
workplace.
Overcoming the Limitations of Previous
Studies
Except for Edmans (2011), previous studies use
either accounting measures or unsophisticated
financial performance measures. Accounting mea-
sures are based on historical data and are therefore
backward looking, not easily capturing intangible
value (Berrone, Surroca, & Tribó, 2007; Edmans,
2011; Hillman & Keim, 2001) and failing to fully
assess the potential value of good employee rela-
tions. Also, accounting data are susceptible to
management manipulation and the choice of
accounting procedures (McGuire, Sundgren, &
Schneeweis, 1988). Stock market information pro-
vides a better alternative, more closely represent-
ing stakeholder value, allowing to control for risk,
and “suffer[ing] fewer reverse causality issues”
(Edmans, 2011, p. 622), which is of particular
interest in this study given the recurrent cautions
against the possibility of reverse causality in the
link between human resource management and
organizational performance (Becker & Huselid,
2006; Wright, Gardner, Moynihan, & Allen,
2005). It is also forward looking, concentrating on
the expected returns of companies rather than on
their historical performance, and is therefore more
likely to consider information about a company
(such as that provided by an award on employee
relations) that might affect its future (tangible as
well as intangible) value.
Considering risk is essential, since financial
performance can be adequately measured only
when returns are risk adjusted. Only four of the
studies summarized in Table I use at least some
measure that takes risk into account. Likewise, it
is important to consider the variation of risk over
time, which none of the previous studies does.
Accounting measures disregard risk altogether,
whereas traditional measures of long-term finan-
cial performance assume that risk is constant over
Human Resource Management DOI: 10.1002/hrm
 GREAT PLACES TO WORK®: RESILIENCE IN TIMES OF CRISIS 481

TABLE I Summary of Previous Studies on the Financial Performance of the “100 Best Companies to Work for in
America” (BCW)
Authors Lists Data Methods Results
Hannon & 15 firms Daily stock Short-term event study (CAR); No significant impact on firm
Milkovitch of the returns. event window (–2, 2) days. returns from announcement.
(1996) 1984 list
Lau & May 1993 Accounting data Compare the differences All measures (except ROE) were
(1998) (sales growth, between BCW and a sam- statistically higher for BCW than
asset growth, ple of S&P 100 constituents for the comparison companies.
ROA, ROE); (accounting measures).
1990–1994.
Fulmer, 1998 Accounting and Compare different accounting Accounting measures are gener-
Gerhart, financial data measures (ROA and Market ally better for the BCW than for
& Scott (stock returns); to Book ratio) of the BCW and the matching sample portfolio.
(2003) 1995–2000. a matched sample portfolio. Cumulative annual returns are
Compare the (unadjusted higher for BCW than for the market
for risk) annual and cumula- index, but the differences are not
tive annual returns of the consistent for annual returns. BCW
two portfolios with the CRSP annual returns are not statistically
value weighted index. different from the matching sample
portfolio except for 1998.
Filbeck 1998 Daily and Short-term event study (AR/ Positive abnormal returns on the
& Preece monthly stock CAR); event window (–15, 15) date of the announcement and two
(2003) returns; 1987– days. weeks prior.
1999. Long-term event study No evidence of consistent outper-
(BHAR): compare BCW with formance on an annual basis, but
a portfolio of matching firms; some support for market outper-
compute Sharpe, Jensen, and formance of BCW when consid-
Treynor measures. ering holding periods of several
years. BHAR results are similar.
Ballou, 1998– Accounting Estimate the determinants of BCW were larger (higher market
Godwin, & 2001 data and stock firm market value consider- value) than companies in their
Shortridge returns; 1998– ing: book value, earnings, matching sample. This effect was
(2003) 2001. R&D expenses, sales and larger for the top third of compa-
asset values. Compare the nies. The average two-year cumula-
average cumulative two-year tive returns (unadjusted for risk)
returns (unadjusted for risk) was higher for BCW than for the
of BCW with a matching sam- matching sample.
ple.
Faleye & 1998– Daily and Short-term event study (CAR) Statistically significant average
Trahan 2005 monthly stock with several event windows cumulative abnormal returns for all
(2011) returns as well ranging from (–5, 5) days. the analyzed event windows. BHAR
as account- Long-term event study using (for one, two, and three years) for
ing data (ROA, one-, two-, and three-year BCW are statistically higher than
Tobin’s q); 1995– BHAR. for the matching sample.
2005. Compare ROA and Tobin’s q of ROA and Tobin’s q are also higher
BCW with a matching sample. for BCW than for the matching
sample.
Edmans 1984 Accounting and Long-term event study using BCW generate superior long-term
(2011) 1993 monthly stock calendar time portfolio performance even when control-
1998– returns; 1984– approach, Carhart (1997) four- ling for a set of observable charac-
2009 2009. factor model, CAR and BHAR. teristics.
Perform numerous robust-
ness checks.

Human Resource Management DOI: 10.1002/hrm

482 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2016
time, which can result in biased measures of perfor-
mance (Aragon & Ferson, 2010; Ferson & Schadt,
1996; Jagannathan & Wang, 1996). Longin and
Solnik (1995) show that the correlations of market
returns are time varying and are higher in peri-
ods of high volatility, which characterizes market
downturns (Giot, 2005). During bear markets, the
correlations of assets tend therefore to increase
(Ang & Chen, 2002; Longin & Solnik, 2001) and
so also their level of risk. To account for time-vary-
ing risk, we use a conditional model, which allows
for both risk and performance to change over dif-
ferent market regimes, specifically periods of bull
and bear markets. This has two main advantages:
it provides less biased estimates of performance,
and it allows us to examine great workplaces’ per-
formance in times of crisis.
Again, with the exception of Edmans (2011)
and Faleye and Trahan (2011), previous studies
concentrate on only one or up to
five best places to work lists and
To account for time-
consider a similar number of years
varying risk, we use of financial data. We use more com-
plete and up-to-date information by
a conditional model, working with 27 years of data, com-
prising the 1984 and 1993 precur-
which allows for both
sor lists as well as the rankings from
risk and performance 1998 to 2010. This presents a more
updated and complete appraisal,
to change over which is especially important con-
sidering there has been a recent and
different market
manifest evolution in what stake-
regimes, specifically holders value, including investors
and financial analysts (Ioannou &
periods of bull and Serafeim, 2010). While we do not
expect good employee relations to
bear markets.
have become unimportant to inves-
tors, the increased acknowledgment
of its value might mean that investors already
incorporate this information into their evalua-
tions of companies.
Additionally, measures of long-term perfor-
mance such as Cumulative Abnormal Returns
(CARs) or Buy and Hold Abnormal Returns
(BHARs)—as used by Hannon and Milkovitch
(1996), Filbeck and Preece (2003), and Falaye and
Trahan (2011)—present particular statistical prob-
lems, namely, the cross-sectional dependence of
firm returns (Lyon, Barber, & Tsai, 1999; Mitchell
& Stafford, 2000). This is especially salient when
the analyzed events (in this case, inclusion on
the best places to work lists) occur simultane-
ously. As the returns of firms in each year’s list
are measured in reference to the same time hori-
zon, there is correlation among them, which is
not adequately taken into account by methods
such as CAR or BHAR. Moreover, BHAR requires a
benchmark, usually a so-called matched sample of
random firms with similar characteristics. Size and
book-to-market ratio are the characteristics typi-
cally used. However, as Fama (1998) points out,
matched samples based on these characteristics
alone can result in an imperfect expected return
proxy. This problem is compounded the longer
the time horizon considered. The estimated mean
BHAR is therefore highly sensitive to the methods
used to construct matched samples (Fama, 1998;
Mitchell & Stafford, 2000), with variations that
can be as high as 20 percent in either direction
(Mitchell & Stafford, 2000).
Our study, like that of Edmans (2011), uses
a calendar-time portfolio method, advocated
by authors like Fama (1998) and Mitchell and
Stafford (2000), among others. This approach
eliminates the problem of cross-sectional depen-
dence by aggregating individual firm returns into
a single portfolio (Lyon et  al., 1999). In order to
determine if our results are due to the common
characteristics of best places to work, we test them
using returns in excess of characteristic-matched
portfolios (Wermers, 2004) as an alternative to
using matched samples.
Finally, traditional methods to measure finan-
cial performance tend to ignore the fact that
stock returns do not follow a normal distribution
(although this has been widely acknowledged
since Alexander, 1961), therefore compromising
the efficiency of financial performance parameter
estimates. We adopt a bootstrap technique (Efron,
1979), detailed later, which enables statistical
inferences about the financial performance of a
given portfolio without the need for any paramet-
ric assumption regarding the distribution of the
model’s residuals.
Why Should Best Places to Work Perform
Better?
There are different rationales to explain why a
best employer award should impact a firm’s finan-
cial performance. Some authors identify the pro-
cess itself of applying for an award as a source of
business benefits. The guidelines supplied for self-
evaluation and application purposes, as well as the
examples of past recipients, provide guidance for
enhanced organizational practice (Laszlo, 1996).
Indeed, Down and Smith (1998) find that com-
panies applying for the British award Investors in
People report better training management, labor
cost reductions, improvements in communication
flows, and enhanced perception among employ-
ees of their role in achieving business objectives.
The fact that companies more closely monitored
their operations made processes more explicit and
highlighted areas of improvement.
Human Resource Management DOI: 10.1002/hrm

But the main arguments center around two
issues, which we expound in this article. One has
to do with the effect on the firm’s reputation of
being distinguished by such an award. The other
relates to the intrinsic organizational features that
are being endorsed. Companies with exemplary
employee relations may be in a better position to
attain superior operational results, which will in
turn lead to better financial performance. These
arguments may be even more pertinent in times
of crisis and may explain a special resilience on
the part of great workplaces.
The Reputation for Being a Best Employer
Being recognized by an independent institution as
a great workplace sends a powerful message about
the firm’s ability to deliver superior performance.
Due to incomplete or inaccurate information
available in the market, investors and other stake-
holders often rely on firms’ reputation, or signals
such as awards and distinctions. Reputation can be
defined as “a relatively stable, issue specific aggre-
gate perceptual representation of a company’s past
actions and future prospects compared against
some standard” (Walker, 2010, p. 370). It provides
an instant and convenient way for stakeholders—
comprising investors, customers, job applicants
and the general public—to make assessments and
decisions about a company (Fombrun & Shanley,
1990). HRM practices have been argued to influ-
ence organizations’ overall reputation (Ferris,
Perrewé, Ranft, & Zinko, 2007). Fombrun (2007)
also sustains that the inclusion (or exclusion) in
rating lists clearly affects firms’ reputations. Joo
and Mclean (2006) argue that this particular list is a
valid and reliable reputation index, being strongly
based on the multiple perceptions of a relevant
stakeholder, namely, the companies’ employees.
Having a good reputation can grant a com-
pany a variety of advantages, including more
easily attracting job applicants (Wayne & Casper,
2012), contractors, investors, and customers, and
securing lower costs, charging premium prices,
and reaping higher profits (Jones, Jones, & Little,
2000; Walker, 2010). It also elicits positive atti-
tudes and behaviors from customers, such as
customer identification with the company, pur-
chase, loyalty, and word-of-mouth (Bhattacharya
& Sen, 2004). Awards recognizing outstanding
employee relations can enhance the attraction
and retention of talented and valued employees
(Ferris et al., 2007; Joo & Mclean, 2006; Wayne &
Casper, 2012; Wright, Ferris, Hiller & Kroll, 1995),
as well as resulting in reduced search, training and
turnover costs for the company (Thornbury &
Brooks, 2010), which directly influence financial
performance.
Human Resource Management DOI: 10.1002/hrm
GREAT PLACES TO WORK®: RESILIENCE IN TIMES OF CRISIS 483
Roberts and Dowling (2002) argue that repu-
tation can be a sustainable source of competitive
advantage in that its intangible nature makes it
difficult to imitate by competitors. Several studies
have examined the impact on share prices of com-
panies receiving awards or distinctions similar to
that of the GPTW® Institute, with mixed results.
While some studies (Doh, Howton, Howton, &
Siegel, 2010; Hendricks & Singhal, 1996; Wright
et al., 1995) find visible reactions of the stock mar-
ket to award announcements, others (Hannon &
Milkovitch, 1996; Przasnyski & Tai, 2002) find no
such effects. In the first case, there is a correcting
effect on stock prices, which are adjusted to incor-
porate the value (or devalue) associated with the
event announced. If no effect is found, authors
conclude that either investors do not value the
awarded features after all or the market already
possessed the relevant information, and inclusion
on the lists only confirmed old news (Hannon &
Milkovitch, 1996; Przasnyski & Tai, 2002).
The best places to work lists
endorse remarkable employee rela- Companies with
tions, the value of which is primar-
ily intangible and the impact of exemplary employee
which at the financial level is largely
felt in the long run. This makes relations may be
it especially difficult to appreci- in a better position
ate and assess to outside investors,
even when validated by external to attain superior
institutions. Edmans (2011) reports
evidence of the recurrent under- operational results,
pricing of intangible assets such as which will in turn lead
R&D expenditure, advertising, pat-
ent citations, and software develop- to better financial
ments, and concludes that markets
fail “to incorporate intangible assets performance.
fully into stock valuations” (p. 621)
in the particular context of this award. Given this
evidence, in addition to that found in previous
studies of best employers, we expect that great
workplaces benefit from the reputation of being
recognized as such—particularly since this is certi-
fied by an independent institution like the Great
Place to Work® Institute—but the market may fail
to fully incorporate this intangible value into their
stock prices. Therefore, we posit that:
Hypothesis 1: Companies included in the “100 Best
Companies to Work for in America” lists will show
positive risk-adjusted abnormal returns.
The Intrinsic Value of Superior Employee
Relations
Demonstrating the business value of positive
employment relationships has been a true quest
484 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2016
in the field of HRM. The impact of good employ-
ment relationships on organizational perfor-
mance, including at the financial level, has been
a central concern. The resource-based view has
been used to explain how HRM can contribute
to the acquisition and development of unique
and firm-specific strategic resources (such as
employees’ skills, knowledge, and ability to learn,
as well as complex social systems like organiza-
tional culture and climate) that can sustain con-
tinuous competitive advantage in
that they are particularly difficult
The resource-based to replicate (Barney, 1998; Colbert,
view has been used
2004; Wright, Dunford, & Snell,
2001). The complexity of the HR
to explain how HRM system and of the relationships
linking HRM to organizational per-
can contribute to formance has warranted the refer-
the acquisition and
ence to a “black box” in HRM (e.g.,
Becker & Huselid, 2006; Lengnick-
development of Hall, Lengnick-Hall, Andrade, &
Drake, 2009). However, there is
unique and firm- a fairly established overall model
specific strategic
of the links between HRM and
performance. Boxall and Macky
resources (such as (2007, p. 267) quite clearly appoint
“employee behavior” as “critical
employees’ skills, to whether the desired organiza-
knowledge, and
tional outcomes will be achieved,
and [behavior] is influenced by
ability to learn, as employee perceptions of, and their
cognitive and affective responses to,
well as complex HR practices.” In outline, HRM prac-
social systems like
tices and related systems (including
organizational culture and climate)
organizational culture exert direct and indirect influences
on employees’ capabilities (knowl-
and climate) that can edge, skills, and abilities), attitudes
sustain continuous
(satisfaction, commitment, moti-
vation, etc.), perceptions (of orga-
competitive nizational and/or leader support,
trust, justice, etc.), and behaviors
advantage in that (attendance, turnover, in-role and
they are particularly
extra-role behaviors), affecting indi-
vidual and collective performance,
difficult to replicate. and organizational-level outcomes
(productivity, performance, product
or service quality, innovation, cus-
tomer satisfaction, profitability, etc.).
A growing number of studies explore this
same model in detail (for informative reviews,
please see Boxall & Macky, 2007; Combs, Liu,
Hall, & Ketchen, 2006; Meyer & Smith, 2009;
Park, Mitsuhashi, Fey, & Björkman, 2003). There
is also extensive empirical evidence to support it.
In particular, high performance work systems
(HPWSs)—internally coherent and coordinated
sets of HR practices that complement and sup-
port each other (Huselid, 1995)—are recurrently
associated with superior organizational perfor-
mance. Huselid’s (1995) seminal study reveals
how high-performance work practices directly
affect employee turnover (lower) and produc-
tivity (higher), which in turn impact corporate
financial performance. Combs et  al. (2006) pres-
ent the results of a meta-analysis of 92 studies to
provide substantial evidence of the positive rela-
tion between HPWSs and organizational perfor-
mance. They further show that this is as strong for
financial performance measures as for operational
performance.
Focusing specifically on best places to work,
Faleye and Trahan (2011) find that they out-
perform a comparable group of firms in several
operational performance dimensions, including
employee productivity, firm-level productivity,
and profitability, supporting the notion that
HRM can lead to financial success via opera-
tional performance. Great workplaces are there-
fore likely to attain better performance by virtue
of the superior way in which they manage their
employees.
This might be difficult to disentangle from a
reputation effect. However, higher-ranking com-
panies will have scored higher in the employee
survey that measures perceptions on credibility,
respect, fairness, pride, and camaraderie. Therefore,
they likely benefit from having employees with
more positive attitudes and perceptions. In addi-
tion, apart from the employee survey, the Great
Place to Work® Institute analyzes nine program
areas (developing, caring, thanking, inspiring,
speaking, listening, hiring, sharing, celebrating),
which they believe are indicative that companies
“achieve organizational objectives” and “employ-
ees give their personal best” and “work together as
a team/family in an environment of trust” (Great
Place to Work® Institute, 2013). So, although all of
these companies practice good employee relations
(as attested by their inclusion on the lists), it is a
tenable assumption that companies with higher
scores will have superior organizational capabili-
ties and be better positioned to attain improved
performance. Kruse, Blasi, and Freeman (2012) do
in fact show that there can be substantial varia-
tion in the particular practices implemented in
best workplaces, which have an impact on firm
performance. Therefore, if the intrinsic value of
superior employee relations prevails, companies
placed higher in the ranking should present better
financial performance than those on the bottom.
In order to test the effect of the intrinsic value of
superior employee relations on financial perfor-
mance, we propose:
Human Resource Management DOI: 10.1002/hrm

Hypothesis 2: Companies ranked higher in the “100
Best Companies to Work for in America” lists will
show higher positive risk-adjusted abnormal returns
than those ranked lower.
Resilience in Times of Crisis
In periods of economic crisis, companies experi-
ence sales and revenue contraction. Budget cuts,
organizational restructuring, downsizing, and lay-
offs often ensue. Most companies do badly during
financial crises and suffer the compounded conse-
quences of market downturn and organizational
disruption. Although job security is characteristic
of great workplaces (Joo & Mclean, 2006), they are
arguably more susceptible in the event of layoffs.
Downsizing may not be avoidable, and several great
places to work have resorted to layoffs (Iverson &
Zatzick, 2011). In such cases, employee relation-
ships can be strained, especially in companies that
nurture employee welfare and relational-type psy-
chological contracts (Edwards, Rust, McKinley, &
Moon, 2003; Iverson & Zatzick, 2011).
Conversely, companies with commendable
management might fare better than competitors
in adverse situations. There are no studies that spe-
cifically test whether being a great workplace can
protect a company financially during crises. But
there are compelling arguments to support this,
and empirical evidence in related areas. Building
on the arguments presented earlier, a reputation
built on publicized good practice can constitute
a “reservoir of goodwill” that protects companies
from adverse market conditions. Moreover, the
organizational characteristics and capabilities that
bring financial gains in normal circumstances can
be even more relevant during crises. The organi-
zational climate and HRM philosophy that are
typical of best workplaces may equip them to
tackle uncertainty and adapt more easily in times
of trouble (Lyman, 2003) by instilling in people
the right kind of attitudes and eliciting favorable
behaviors.
The Reputation Shield
The previously described advantages of having
established a good reputation are put to the test in
the face of adversity. Although seldom specifically
addressed, it is a presumed aspect of a good repu-
tation that it can protect its incumbents in times
of trouble, as stakeholders will give them the ben-
efit of the doubt (Jones et  al., 2000). Fombrun,
Gardberg, and Barnett (2000) portray reputation
as a potential safety net that can protect a com-
pany from the negative reactions of a variety of
stakeholders, comprising employees, investors,
the community, and customers.
Human Resource Management DOI: 10.1002/hrm
GREAT PLACES TO WORK®: RESILIENCE IN TIMES OF CRISIS 485
Studies have shown that companies with posi-
tive reputations benefit from more favorable atti-
tudes from consumers and are relatively spared by
stock market decline when facing negative situa-
tions. Companies listed in Fortune’s Most Admired
Corporations suffered a lower stock price fall in
the 1989 market crash (Jones et  al., 2000), and
firms included in the Domini Social Index mutual
fund (which screens for social and environmental
excellence) were also shielded from the stock mar-
ket drop associated with the 1999 failed Seattle
World Trade Organization meeting (Schnietz &
Epstein, 2005). Corporate social responsibility
(CSR) activities in particular can generate positive
attitudes and behaviors from customers, includ-
ing purchase, loyalty, and word-of-mouth, as well
as resilience to negative company information,
particularly when firms’ practices
affect causes valued by customers
(Bhattacharya & Sen, 2004). The There are no studies
same likely applies to other relevant
that specifically test
stakeholders (Fombrun et al., 2000),
whose responses toward well- whether being a
reputed companies may be more
forgiving. great workplace can
Moreover, in times of uncer-
protect a company
tainty, stakeholders may rely even
more on reputation, and give pref- financially during
erential treatment to firms with a
good reputation rather than take crises. But there
risks with less well-known firms. In
are compelling
short, the reputation built on best
practice valued by stakeholders arguments to support
can protect the company from the
adverse effects of a crisis. this, and empirical
There are other advantages of a
evidence in related
good reputation that can be espe-
cially important during financial areas.
crises. For example, Ioannou and
Serafeim (2010) show that firms
with higher CSR visibility receive more favorable
recommendations from financial analysts. And
Verwijmeren and Derwall (2010) find that compa-
nies with leading track records in employee well-
being are regarded as especially creditworthy by
the markets. They avoid going bankrupt by incur-
ring lower debt levels, and they benefit from bet-
ter credit ratings regardless of their level of debt.
Intrinsic Resilience Capacity
Even in times of crisis, best employers maintain
their concern for employees and benefit from their
investment in human capital and positive work
environment. Iverson and Zatzick (2011) show
that organizations that rely specially on human
capital and employee commitment suffer less with
downsizing when they provide training, extensive
486 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2016
communication, careful explanations, and com-
passion. Great workplaces are more likely to be
considerate if layoffs or other disruptive measures
are inevitable. Teece, Pisano, and Shuen (1997)
also argue that in times of rapid change, firms
with dynamic capabilities are likely to succeed.
Dynamic capability is the ability to face external
challenges with “timely responsiveness and rapid
and flexible product innovation, coupled with
the management capability to effectively coordi-
nate and redeploy internal and external compe-
tences” (p. 515). Skill acquisition, learning, and
other processes with intangible value, including
tacit know-how and reputation, are fundamen-
tal (Teece et al., 1997). Shafer, Dyer, Kilty, Amos,
and Ericksen (2001) present case-based evidence
describing how, facing a highly
unpredictable and uncertain envi-
Apart from the
ronment, a health care institution
renewal of developed organizational agility by
implementing HRM practices akin
knowledge, skills, and to HPWSs. Likewise, Lengnick-Hall,
Beck, and Lengnick-Hall (2011) put
abilities, HPWS and
forward the notion of capacity for
other progressive resilience as the ability of organiza-
tions, not only to cope and recover
HRM practices from threatening and stressful situa-
tions, but also to thrive and develop
are consistently
new capabilities from adversity.
associated with They emphasize the “unique blend
of organization-level cognitive,
higher levels of behavioral, and contextual capabili-
ties and routines” (p. 3) that derive
employee attitudes
from a company’s complex social
such as satisfaction, system and are fostered through
HRM. Many of the elements pro-
involvement, posed by Lengnick-Hall et al. (2011,
p. 249) befittingly reflect the five
motivation, and
dimensions measured for this award
commitment. (e.g., “Build relational rather than
transactional relationships with
employees”; “Nurture a climate of
reciprocal trust and interdependence”).
Additionally, there is established literature
substantiating the impact of HRM on employee
attitudes and behaviors particularly benefi-
cial in trying times. Apart from the renewal of
knowledge, skills, and abilities (Park et al., 2003;
N. Takeuchi, Wakabayashi, & Chen, 2003), HPWS
and other progressive HRM practices are consis-
tently associated with higher levels of employee
attitudes such as satisfaction, involvement, moti-
vation, and commitment (Ahmad & Schroeder,
2003; Boxall & Macky, 2007; Meyer & Smith,
2009; Park et  al., 2003; R. Takeuchi, Chen, &
Lepak, 2009; Tsui, Pearce, Porter, & Tripoli, 1997).
In turn, these attitudes elicit behaviors that can
prove pivotal in periods of change, uncertainty,
or exceptional strain. Positive emotions and atti-
tudes (including organizational commitment and
emotional engagement) help to reduce negative
reactions to change (Avey, Wernsing, & Luthans,
2008; Lines, 2004) and facilitate employee accep-
tance of organizational change (Iverson, 1996).
Avey et al. (2008) suggest that positive emotions
can help employees cope with change and situ-
ations that are new and stressful. They also find
positive emotions, as well as attitudes such as
hope, efficacy, optimism, and resilience, to have
an impact on organizational citizenship behav-
ior (OCB). Other antecedents of OCB comprise
employee satisfaction, organizational commit-
ment, perceptions of fairness, trust and organi-
zational support, perceptions related to the job
and some task characteristics, as well as appro-
priate leader behaviors (P. Podsakoff, MacKenzie,
Paine, & Bachrach, 2000). There are various con-
ceptualizations of OCB, but they can generally
be described as “individual contributions in the
workplace that go beyond role requirements and
contractually rewarded job achievements” (Organ
& Ryan, 1995, p. 775). This encompasses a variety
of behaviors particularly advantageous during cri-
ses, including: helping others with difficulties and
actively contributing to solve or avoid problems;
being resilient and maintaining good spirits in the
face of adversity; being loyal to the organization,
defending it against external threats, and remain-
ing committed to it even in adverse conditions;
taking the initiative of being creative and inno-
vating to improve performance and putting in the
extra effort as circumstances require; being com-
mitted and engaged in organizational life to the
point of willingly participating and taking respon-
sibility in its governance; and actively seeking to
improve one’s own knowledge, skills, and abilities
in order to better contribute to the organization’s
success (P. Podsakoff et  al., 2000). OCBs associ-
ate negatively with turnover intentions, actual
turnover, and absenteeism; and associate posi-
tively with employee performance ratings, unit-
level measures of productivity, efficiency, reduced
costs, and customer satisfaction (N. P. Podsakoff,
Whiting, Podsakoff, & Blume, 2009).
The reported evidence suggests that great
workplaces might be somewhat shielded against
financial crises. Moreover, the input from the
HPWS and HRM literature strongly suggests best
employers are better arrayed to handle prob-
lems associated with adverse market conditions.
However there seems to be no academic studies
testing this proposition in the case of best places
to work. The recent financial and economic crises
present an opportunity to test whether:
Human Resource Management DOI: 10.1002/hrm

Hypothesis 3: The financial performance of companies
included in the “100 Best Companies to Work for in
America” lists will not be negatively affected during
periods of financial market decline.
Methods
Given the results of previous studies that show
investors find it hard to value the delayed tangi-
ble effects of intangible assets, we are interested
in measuring the long-term financial impact on
stock prices of being a great workplace. We there-
fore use the calendar-time portfolio approach sug-
gested by Jaffe (1974) and Mandelker (1974), and
recommended among others by Fama (1998) and
Mitchell and Stafford (2000). This consists of cre-
ating an equally weighted portfolio of best work-
places for each year, which is constructed such
that it contains only stocks of companies included
on the list, and for the period that they remain on
the list. Every year, starting on February 28, 1998,
a new list is published and the portfolio is adjusted
at the end of that month to reflect any changes.
The short-term impact is ignored in our study by
design, given that our portfolio is updated at the
end of the month of the announcement, which
usually occurs in the second or third week of the
announcement month. Therefore, by the time the
companies are included in our portfolio, any short-
term impact of the announcement has already
been incorporated in share prices. The portfolio
is also rebalanced at the end of every month to
account for any firm that started/stopped being
traded.
To obtain a risk-adjusted long-term measure of
performance we start with Carhart’s (1997) four-
factor model (given by Equation 1), which is a
time-series regression model, that adds a momen-
tum risk factor to the well-known Fama and
French (1993) three-factor model. The inclusion
of these added risk factors to the classical Capital
Asset Pricing Model (CAPM) makes the four-fac-
tor model better able to explain expected stock
returns, thus producing a more robust measure
of performance, and overcoming some anomalies
identified in the literature relative to CAPM. For
more detailed accounts, please refer to Fama and
French (1993) and Carhart (1997).
Rp,t = + m
Rm,t + SMBSMBt + HML
HMLt
+ MOMt + εt (1)
MOM
Rp,t is the excess return of the best places to work
portfolio on time t. The parameter is the esti-
mated performance measure of the best places
to work portfolio. Rm,t represents market excess
returns on time t, given by the benchmark market
Human Resource Management DOI: 10.1002/hrm
GREAT PLACES TO WORK®: RESILIENCE IN TIMES OF CRISIS 487
index. HML, SMB, and MOM are the value, size,
and momentum factors. The value factor (HML,
for high minus low) is given by the difference of
the returns of portfolios created by the magnitude
of the book-to-market ratio; the size factor (SMB,
for small minus big) corresponds to the difference
between the returns of small and large capitaliza-
tion portfolios; and the momentum (MOM) factor
is given by the difference between portfolios with
the largest previous 12-month period returns and
portfolios with the smallest previous 12-month
period returns. The betas in the model represent
the estimated risk measures for the different risk
factors: market, size, value, and momentum.
Finally εt are the regression’s residuals.
A performance of zero (as measured by the
alpha estimate) means that the portfolio of best
workplaces has returns similar to what is expected
for its risk profile (hence, there are no abnormal
returns). An alpha greater than zero (statistically
significant) indicates that this portfolio has a per-
formance above expected for its risk profile.
As noted earlier, traditional measures of per-
formance—including Carhart’s (1997) four-factor
model—assume risk to be constant over time,
which can result in biased measures of perfor-
mance (Aragon & Ferson, 2010; Ferson & Schadt,
1996; Jagannathan & Wang, 1996). Because it is
widely acknowledged that risk changes over time,
we further employ a conditional model that allows
risk and performance to vary over different mar-
ket regimes. To define market regimes, we use the
bull and bear states of financial markets according
to the method of Pagan and Sossounov (2003).
These regimes are commonly used to describe
cycles in equity prices, where bull markets cor-
respond to ongoing periods of growth, whereas
bear markets are periods of market price decline.
These regimes try to capture systematic move-
ments in market prices using only financial mar-
ket data, while ignoring short-term noise effects.
This endogenous method has the advantage of
providing contemporaneous information about
the states of the market in contrast to methods
that require exogenous variables, lagging relative
to market data, such as the business cycle defini-
tion given by the National Bureau of Economic
Research (NBER). The two bear market and three
bull market periods identified during the timeline
under analysis are depicted in Figure 1.
Different methodological approaches have
been used to measure financial performance in dif-
ferent states of the economy (e.g., Kosowski, 2011;
Moskowitz, 2000; Wang, 2010). The division of
the sample between bull and bear market regimes
was first considered by Lakonishok and Shapiro
(1984) in the context of asset pricing. The use of a
488 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2016

Both models are estimated by an Ordinary

Least Squares (OLS) regression. Statistical infer-
ences on the estimated parameters imply the
4000
assumptions of normality, homoskedasticity,
and independence of the model residuals (εt).
3500
Unfortunately, one or all of these assumptions are
frequently violated when financial models are esti-
mated. To overcome the heteroskedasticity of the
3000 residuals’ standard errors, we use Cribari-Neto’s
(2004) procedure. When both heteroskedasticity
and autocorrelation are present, we use the correc-
2500 tion suggested by Newey and West (1987).
To deal with the model residuals’ nonnormal-
ity we use a nonparametric technique, namely, the
2000 bootstrap method. Bootstrapping has the advan-
tage of allowing statistical inferences about the
performance of a designated portfolio, given by an
1500 OLS regression, without the need for any paramet-
ric assumption relative to the model’s residuals. It
has been used in the context of financial perfor-
1000 mance measurement by Kosowski, Timmermann,
Wermers, and White (2006) and Kosowski, Naik,
and Teo (2007). Refer to Hall (1992), Politis (2003),
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

and Godfrey (2009), and references therein, for a

Portfolios
GPW Portfolio
S&P 500
CRSP
FIGURE 1. Evolution of the Best Places to Work
Portfolio (GPW) Prices as Compared to the CRSP
Value-Weighted and S&P 500 Indices
dummy variable to analyze financial performance
in different market regimes is in line with the
work of Wang (2010). The conditional model we
adopt consists of applying a dummy variable for
the market regimes to Carhart’s (1997) four-factor
model, resulting in the following equation:
Rp,t = + D
Dt + mRm,t + D,mDtRm,t + SMBSMBt
+ D SMBt + HMLHMLt + D,HMLDtHMLt
D,SMB t
+ MOM
MOM t
+ D,MOMDtMOMt + εt (2)
Relative to Equation 1, this one adds D as a
dummy variable that assumes the value of one
in bear markets and zero in bull markets. The
parameter now corresponds to the estimated
performance measure of the best places to work
portfolio during bull markets, and αD is the dif-
ference in performance during bear markets. The
same applies to all the risk factors (β). This model
specification produces less biased estimates of per-
formance, as it considers time-varying risk. It also
allows us to specifically analyze these firms’ finan-
cial performance in times of crisis.
detailed presentation.
Regime
The traditional bootstrap method proposed
bear
bull
by Efron (1979) assumes independent identically
distributed data (IDD), which is not usually the
case with financial data. The stationary bootstrap
method of Politis and Romano (1994) is more
robust, joining together blocks of random length
(with a geometric distribution with mean (b) and
resulting in bootstrap sample paths that are a sta-
tionary series. The mean size of the block sample
(b) is computed using the method suggested by
Patton, Politis, and White (2011). This block-boot-
strap method has been shown to perform well with
dependent time series, the so-called processes near
epoch dependent (NED) on an underlying mix-
ing process (Gonçalves & White, 2002, 2004). For
instance, generalized autoregressive conditional
heteroskedasticity (GARCH) models, which have
successfully captured financial time series styl-
ized facts, are an example of processes NED on
an underlying mixing process, under mild regu-
larity conditions. The bootstrap gives a p-value
for the t-statistic associated with each of the esti-
mated model parameters. The t-statistic and not
the parameter itself is considered since, under its
associated null hypothesis, it has a limiting distri-
bution that does not depend upon any unknown
parameter and therefore is asymptotically pivotal.
Hall (1992), Godfrey (2009), and Beran (1988) dis-
cuss the benefits of using asymptotically pivotal
statistics. Our bootstrap strategy closely follows
the residual-based bootstrap for linear regression
used by Kosowski et al. (2006, 2007), introduced

Human Resource Management DOI: 10.1002/hrm

 GREAT PLACES TO WORK®: RESILIENCE IN TIMES OF CRISIS 489

by Freedman (1981, 1984) and discussed by Efron TABLE II Number of “100 Best
and Tibshirani (1986), among others. Our boot- Companies to Work for
strap p-values are obtained using 2000 iterations. in America” Included
Data in Each Portfolio
Year No. Firms Included
Monthly total returns and the market benchmark
were collected from the Center for Research in 1984 78
Security Prices (CRSP) database for the period of 1993 69
April 1, 1984, to December 31, 2010. We chose 1998 72
1998 to 2010 as our reference period (starting
1999 68
on February 28, 1998) because it pertains to the
regularly published ranked lists (whereas the two 2000 62
precursor lists were not ranked), allowing for top 2001 59
and bottom halves to be distinguished. The mar- 2002 59
ket return benchmark is the CRSP value-weighted
2003 63
index, which is a broad index including all stocks
traded on the New York Stock Exchange, NASDAQ, 2004 59
and American Stock Exchange. We prefer this 2005 59
index as a primary benchmark instead of the S&P 2006 51
500 because it more closely meets the require-
2007 49
ments of the models used in terms of market cov-
erage. The risk-free rate used is the one-month 2008 47
Treasury bill from Ibbotson and Associates, Inc. 2009 45
that, along with the three factors (SMB, HML, and 2010 44
MOM), were collected in June 2011 from Kenneth
French’s website (http://mba.tuck.dartmouth
.edu/pages/faculty/ken.french/data_library.html). different risk profiles of the portfolios. To appro-
The best places to work lists were collected priately measure the financial performance of
from the GPTW® Institute website (http://www the best places to work portfolios, we must con-
.greatplacetowork.com). Only firms publicly traded sider the statistical significance of the difference
in the above-mentioned stock markets were between the risk-adjusted expected and realized
included in the portfolios. Table II presents the portfolio returns, using the methods described
number of firms included each year. Figure 1 above. These results are presented next.
depicts the result of a hypothetical investment of
1,000 monetary units on the best places to work
Results
portfolio (GPW) starting on February 28, 1998, Table III displays the results for the unconditional
and shows its evolution over the years compar- four-factor model given by Equation 1. Table IV
ing it with equivalent investments on two market reports the results for the conditional model rep-
indices—the CRSP value-weighted index and the resented by Equation 2. The reported t-statistics
S&P 500 (Source: DataStream)—during bull and are corrected for heteroskedasticity and autocor-
bear market regimes. The image suggests a clear relation whenever appropriate. The use of boot-
advantage of the best places to work portfolio strapping to correct for nonnormality is indicated
throughout the period. Yet, the evolution of stock in the tables. The alpha values are in percent-
prices does not constitute a measure of financial age points. Statistical significance is set at the
performance, as it does not take into account the 5 percent level.

TABLE III Unconditional Four-Factor Model: Aggregate Portfolio (1998–2010)

Parameter Estimate t-Statistic p-Value Bootstrap
(%) .437** 2.75 .006 Yes
m
1.053** 23.60 .001 Yes
SMB
.14 1.61 .066 Yes
HML
.054 1.09 .255 Yes
MOM
–.117** –2.59 .005 Yes
*p < .05; **p < .01.

Human Resource Management DOI: 10.1002/hrm

490 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2016
Under the unconditional approach (Table III),
the best places to work portfolio has a monthly
excess return of .437 percent ( ), which suggests
these firms overperform the market benchmark.
However, when adjusting returns for different
market regimes (Table IV), the ( ) parameter is
no longer statistically significant and returns are
therefore not abnormal. So when risk is allowed
to vary over time, great workplaces do not outper-
form the market. This implies that returns were
previously being overestimated by ignoring the
time-varying nature of risk. Our first hypothesis is
therefore rejected.
Table IV also contains the results for the
separate portfolios of companies on the top half
and on the bottom half of the rankings, under
the conditional model. The upper-half portfolio
shows a positive excess return of .487 percent (at
a significance level of 2.7 percent), which trans-
lates into an annual excess return of 6.00 percent.
The lower-half portfolio, however,
has no statistically significant excess
An alpha greater than returns. This shows that the higher-
zero and statistically ranked workplaces do outperform
the market, even when consider-
significant indicates ing  the variation of risk over time,
but the lower-ranked ones do not. It
that the GPW follows that companies on the top
portfolio outperforms half of the rankings have higher
adjusted returns than the ones on
a portfolio of the bottom half, which confirms
our second hypothesis.
companies with Also in Table IV are the results
similar financial for the bear market dummy ( D,
which measures the difference in
characteristics. performance between bull and bear
markets). These are not statistically
significant for either top- or bot-
tom-half portfolios. This indicates that the level
of performance of these companies is not differ-
ent in times of crisis than in periods of growth.
Specifically, top-scoring companies sustain their
positive excess returns during market downturns,
and lower-scoring companies continue to display
neutral performance. In short, neither is nega-
tively affected by the market crisis, confirming
our third hypothesis. Moreover, the risk profile of
both groups is also unaffected during bear mar-
kets, as denoted by the non–statistically signifi-
cant beta dummies ( D).
Robustness Checks
In addition to the results presented earlier, a bat-
tery of other analyses was performed as robust-
ness checks, detailed next. We present some
of the results in Tables V and VI. For the sake
of brevity, other results are omitted from this
article but are available from the authors upon
request.
Considering the longer period of 1984 to
2010, with portfolios starting on April 1, 1984, the
aggregate best places to work portfolio shows posi-
tive abnormal returns both for the conditional
and the unconditional models (Table V). However,
the alpha coefficient is lower under the condi-
tional estimation ( = .213 percent) than with the
unconditional measure ( = .319 percent), reflect-
ing the corrective effect of considering the varia-
tion of risk across different market regimes. The
alpha dummy is not statistically significant, indi-
cating this overperformance to persist during bear
markets. Given our main results, we propose that
this overperformance can be chiefly attributed to
the information contained in the precursor lists
and to the top-scoring companies, although we
cannot include the latter refinement into this
analysis, as the earlier lists were not ranked.
Any long-term performance study depends
on correctly measuring expected returns, in turn
relying on an asset-pricing model. Using a model
that controls for book-to-market ratios, size and
momentum (such as the Carhart model) might
not be enough if our sample of firms is biased in
any of these factors (e.g., if there are too many
small companies or too many companies with
high book-to-market ratios) (Lyon et al., 1999). To
remove biases resulting from having an overrep-
resentation of some characteristic in the sample,
we tested our results when returns are measured
in excess of characteristic portfolios created on
the basis of size, book-to-market ratio (controlling
for industry), and momentum, effectively using a
matched-sample approach at the portfolio level
(Table VI). A performance of zero (as measured by
the alpha estimate) tells us that the same perfor-
mance could be obtained by purchasing a port-
folio of stocks with similar size, book-to-market
ratio (controlling for industry), and momentum
as the ones included on the GPW portfolio. An
alpha greater than zero and statistically significant
indicates that the GPW portfolio outperforms a
portfolio of companies with similar financial char-
acteristics. These characteristic portfolios were
first suggested by Daniel, Grinblatt, Titman, and
Wermers (1997) and improved by Wermers (2004)
to consider a different industry normalization of
the book-to-market ratio (they are available at
http://www.smith.umd.edu/faculty/rwermers
/ftpsite/Dgtw/coverpage.htm). This analysis does
not substantially alter our results.
As an alternative to Pagan and Sossounov’s
(2003) method to define the market regimes,
we also tested the definition given by NBER.
Our results are robust to this test, although the
Human Resource Management DOI: 10.1002/hrm
 TABLE IV Conditional Four-Factor Model with Bull/Bear Dummies (1998–2010)

Human Resource Management DOI: 10.1002/hrm

Aggregate Portfolio Top-Half Portfolio Bottom-Half Portfolio
Parameter Estimate t-Statistic p-Value Bootstrap Estimate t-Statistic p-Value Bootstrap Estimate t-Statistic p-Value Bootstrap
(%) .221 1.72 .089 Yes .487* 2.24 .027 No –.006 –.04 .943 Yes
m
(%) .007 1.17 .218 Yes .003 .64 .522 No .009 1.31 .143 Yes
m
1.101** 18.01 .001 Yes 1.158** 21.58 .000 No 1.041** 12.23 .001 Yes
D,m
–.06 –0.45 .595 Yes –.068 –.75 .457 No –.049 –.32 .711 Yes
SMB
.128 1.19 .161 Yes .079 1.36 .176 No .171 1.11 .200 Yes
D,SMB
–.036 –.18 .818 Yes .185 1.46 .146 No –.216 –.80 .388 Yes
HML
.066 1.11 .264 Yes –.011 –.15 .884 No .116 1.46 .128 Yes
D,HML
–.012 –.13 .904 Yes .182 1.69 .093 No –.161 –1.32 .131 Yes
MOM
–.099 –1.55 .088 Yes –.158** –3.90 .000 No –.049 –.62 .482 Yes
–.059 –.24 .744 Yes .009 .13 .898 No –.124 –.49 .514 Yes
GREAT PLACES

D,MOM

*p < .05; **p < .01.

TO WORK®:
RESILIENCE
IN TIMES OF
CRISIS 491
492 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2016

TABLE V Conditional Four-Factor Model with Bull/Bear Dummies Unconditional Four-Factor Model:
Aggregate Portfolio (1984–2010)
Conditional Model Unconditional Model
Parameter Estimate t-Statistic p-Value Bootstrap Estimate t-Statistic p-Value Bootstrap
(%) .319** 3.21 .005 Yes .213* 2.44 .017 Yes
D
(%) .005 1.10 .226 Yes
m
1.074** 40.57 .001 Yes 1.091** 35.13 .001 Yes
D,m
–.002 –0.02 .948 Yes
SMB
.162** 2.86 .003 Yes .152* 2.28 .015 Yes
D,SMB
.025 .17 .854 Yes
HML
.009 .22 .777 Yes –.007 –.16 .898 Yes
D,HML
.038 .40 .669 Yes

MOM
–.127** –3.83 .001 Yes –.133** –4.61 .000 Yes
D,MOM
.011 .07 .895 Yes
*p < .05; **p < .01.

aggregate portfolio fails to be statistically signifi-
cant at the 5 percent level only marginally.
Finally, in addition to the CRSP value-weighted
index, we also used the S&P 500 index as a bench-
mark (Source: DataStream). In this case, the aggre-
gate portfolio shows statistically significant positive
abnormal returns. The results for the top and bot-
tom half portfolios are similar to those obtained
with the CRSP value-weighted index as the market
benchmark, confirming that these excess returns
are attributable to the top-scoring companies only.
Discussion
Our results show that, contrary to previous studies,
great workplaces do not on the whole outperform
the market.
Of the seven studies reviewed earlier, two
(Hannon & Milkovitch, 1996; Lau & May, 1998)
make only short-term analyses and use lists from
a single year, and cannot be fairly compared to
our results. Of the five studies using some long-
term measure, Fulmer et  al. (2003) and Ballou
et  al. (2003) use accounting data (the drawbacks
of which were described earlier), or financial mea-
sures that are unadjusted for risk. Filbeck and
Preece (2003) and Faleye and Trahan (2011) rely
mainly on BHARs, the limitations of which have
also been identified earlier. Filbeck and Preece
(2003) do use a risk-adjusted CAPM-based finan-
cial measure, but this is outdated, ignoring any
additional risk factor beyond the market’s. Further,
the companies studied by Fulmer et al. (2003) and
Filbeck and Preece (2003) are also limited to a sin-
gle list—1998. The use of limited data sets and less
sophisticated methods in these studies produce at
best inconclusive results.
The remaining study is that of Edmans (2011),
which is the most similar to our own in data,
time periods, and methods. However, he fails to
deal with the statistical stylized facts typical of
financial data (such as nonnormality), and does
not incorporate time-varying risk in his financial
analyses. Our own study reveals that, when we
take into consideration the variation of risk over
time by using a conditional multifactor model, we
find no statistically significant abnormal returns.
These results show that estimates of performance
can be biased when the time-varying nature of
risk is not accounted for.
The fact that the longer period, which
includes the two precursor lists of 1984 and 1993,
does show positive abnormal excess returns under
the conditional model suggests that information
about the value of outstanding employee relations
has been gradually more available to investors. The
precursor lists were published in books, whereas
the rankings from 1998 on are divulged annually
in the widely circulated Fortune magazine (and on
the Internet as of 2006). In addition, academic
studies such as the ones reviewed here have since
proclaimed a positive relationship between being
a great workplace and financial performance.
Ioannou and Serafeim (2010) also report a recent
evolution in what investors and financial ana-
lysts value. The extent to which investors appreci-
ate and are able to evaluate the intangible value
of being a great workplace may therefore have
grown over time. The positive results for the lon-
ger period may therefore be overly reflecting the
impact of the earlier lists. Edmans (2011) shows
that the signaling effect of being included in this
particular ranking increases over time, and its

Human Resource Management DOI: 10.1002/hrm

 TABLE VI Conditional Four-Factor Model with Bull/Bear Dummies for Returns in Excess of Characteristics Portfolios (1998–2010)

Human Resource Management DOI: 10.1002/hrm

Aggregate Portfolio Top-Half Portfolio Bottom-Half Portfolio
Parameter Estimate t-Statistic p-Value Bootstrap Estimate t-Statistic p-Value Bootstrap Estimate t-Statistic p-Value Bootstrap
(%) .230 1.95 .053 No .428* 2.53 0.012 No .060 .34 .722 No
D
(%) .002 .62 .533 No –.002 –.45 0.652 No .005 1.17 .211 No
m
.109* 2.16 .032 No .139* 2.57 0.011 No .070 .91 .345 No
D,m
–.113 –1.37 .172 No –.105 –1.01 0.313 No –.112 –.96 .263 No
SMB
.023 .28 .778 No –.033 –.62 0.535 No .071 .53 .493 No
D,SMB
–.080 –.68 .499 No .164 1.48 0.141 No –.271 –1.49 .093 No
HML
.041 .74 .463 No –.037 –.42 0.675 No .078 1.01 .312 No
D,HML
.035 .38 .705 No .244 1.90 0.059 No –.117 –.90 .299 No
MOM
–.070 –1.41 .160 No –.150** –3.00 0.003 No -.009 –.11 .904 No
–.015 –.13 .895 No .085 .89 0.377 No –.094 –.73 .334 No
GREAT PLACES

D,MOM

*p < .05; **p < .01.

TO WORK®:
RESILIENCE
IN TIMES OF
CRISIS 493
494 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2016
value is gradually incorporated in the firms’ stock
price. He estimated this process to take about four
years, which might explain why being included
on the list per se no longer translates into abnor-
mal excess returns. Our first hypothesis, propos-
ing that these firms have positive risk-adjusted
abnormal returns, is therefore rejected.
We do not suggest best places to work lack a
good reputation for outstanding employee rela-
tions, or that being listed in the GPTW® Institute
rankings is irrelevant. On the contrary, we surmise
that investors have come to recognize the value
of these companies’ distinctive employee rela-
tions and incorporate it into their evaluations.
This interpretation that the financial impact of
reputation is being correctly evaluated by inves-
tors (rather than the alternative
view that exemplary employee rela-
The main contribution tions are not relevant to the firm’s
value) is reinforced by the results
of our study is testing pertaining to our second hypoth-
the resilience of great esis, explained next.
To test our second hypothesis,
workplaces in times we evaluate the performance of
separate portfolios for companies
of crisis. Our model of on the top half of the rankings
financial performance (with better scores) and companies
on the bottom half (with lower
conditional on market scores), with quite revealing results.
While companies ranking higher on
regimes allows
the 100 best employers do display
us to do this by positive excess returns, the com-
panies on the bottom half do not.
separately analyzing This suggests that companies that
develop superior employee relations
firms’ performance do enjoy an advantage that is not
during bull and bear accounted for by the market. We
find that this supports our second
markets. hypothesis. The disparity of prac-
tices reported by Kruse et al. (2012)
and Faleye and Trahan (2011) seems
to be of consequence. Achieving the highest scores
in the dimensions and program areas assessed for
this award has an intrinsic and direct impact on
the company’s financial performance greater than
investors can appreciate.
The main contribution of our study is testing
the resilience of great workplaces in times of crisis.
Our model of financial performance conditional
on market regimes allows us to do this by sepa-
rately analyzing firms’ performance during bull
and bear markets. Our results show that, despite
market downturns, best employers sustain the
same level of performance as in periods of growth.
Specifically, top-ranking companies continue
to outperform the market, whereas companies
on the bottom half carry on displaying neutral
performance. That is to say, their performance is
in no way damaged by market crises. Furthermore,
and contrary to what can be expected during bear
markets (Ang & Chen, 2002; Longin & Solnik,
2001), the systematic risk of all these companies
(both higher and lower ranked) does not increase
during financial crisis. These results supplant our
third hypothesis. Not only are great workplaces’
financial performance not affected during market
decline, but the best among them actually man-
age to exhibit overperformance relative to stan-
dard market benchmarks, while maintaining their
risk profile.
Limitations
Our study has a number of limitations. Our
approach allows us to examine only companies
that are publicly traded in financial markets, which
corresponds to about 59 percent of all best places
to work on average (ranging from 44 percent to 78
percent each year—see Table II). We cannot alto-
gether extrapolate our conclusions to the other 41
percent, which are not publicly traded and have
an array of other diverse characteristics.
Neither does our study contribute to iden-
tify which HR practices have the greater intrin-
sic value. We can only propose that companies
ranked higher on the lists develop more successful
employee relations in financial terms, but we can-
not pinpoint why that is so. More in-depth meth-
odologies addressing management policy and
HR practice details, like those used by Kruse et al.
(2012) and Faleye and Trahan (2011), are more
suitable for that purpose.
Conclusions and Future Research
The financial impact of investing in good
employee relations has long been a pivotal issue
in this area. The financial performance of best
employers, such as those listed in the GPTW®
rankings, has been studied before. However, pre-
vious studies have important limitations, which
we identify. We add to existing studies in several
ways. We use a comprehensive set of financial
market data, which is forward looking and more
apt to incorporate the intangible value of being
a great workplace. We also employ more robust
measures of financial performance, allowing for
the variation of performance and risk over time,
and dealing with the statistical stylized facts typi-
cal of financial data. The results we obtain based
on these methods reveal that previous studies
have tended to overestimate performance. Finally,
and above all, we examine best employers’ perfor-
mance during market crises and find that they are
particularly resilient.
Human Resource Management DOI: 10.1002/hrm
 GREAT PLACES TO WORK®: RESILIENCE IN TIMES OF CRISIS 495

Based on our results, we come to three main
conclusions. First, we surmise that there is a repu-
tation effect attached to being one of the “100 Best
Companies to Work for in America.” Although
we find this group of companies on the whole to
present no abnormal returns in the period from
1998 to 2010, this most likely means that inves-
tors realize the value of remarkable employee rela-
tions, incorporating this into the companies’ share
price. The GPTW® Institute lists surely contribute
substantially for the reputation these companies
have built over time as best employers, legitimiz-
ing and communicating this information to the
market.
Second, we find our contention for an intrin-
sic effect of outstanding HRM on financial per-
formance to be supported. When controlling for
time-varying risk, top-ranking companies show
positive excess returns, whereas lower-ranking
ones do not. Even though the market incorpo-
rates the value of good employee relations on the
whole, the top-scoring companies reap additional
benefits that are not being taken into account by
investors. Therefore, we conclude that companies
that achieve better scores in this best employers
ranking derive intrinsic value that was not fully
reflected in their market value.
Finally, and most novel, best employer com-
panies seem to benefit from some kind of pro-
tection (reputational and intrinsic) in times of
trouble, sustaining both their financial perfor-
mance and level of systematic risk even during
financial crises. Unlike other companies in the
market, they maintain their value during tough
times, and the best of them continue to outper-
form the market at an average of 6 percent a year.
The reputation they have built may indeed con-
stitute a reservoir of goodwill that protects them
from the worst consequences of financial crises.
And the resources and capabilities developed in
the course of establishing a great workplace afford
them the advantage of especially committed
employees, who are willing to face adversity and
come up with innovative solutions, making these
organizations more resilient in the face of hard-
ship. Our results provide an empirical founda-
tion for the GPTW® Institute’s (2011b) claim that
“When times are tough, employees at great work-
places show the resiliency to pull through.”
Following on the results of Doh et al. (2010),
a future study might examine the effects of falling
out of the GPTW® Institute rankings. Looking at
the effects of being deleted from the
Calvert social responsibility index,
the authors identify an average Best employer
1.5 percent decline in stock prices.
companies seem to
This implies that, just as third-
party endorsement might improve benefit from some
a firm’s reputation, its removal can
also seriously damage it. Although kind of protection
®
being included in the GPTW list
(reputational and
per se may no longer be news to
investors, dropping out of the rank- intrinsic) in times of
ings could be received by investors
with surprise and consequent pen- trouble, sustaining
alty. This reputation tarnish effect
both their financial
deserves specific research.
performance and
Acknowledgments
The research for this article was level of systematic
financed by the Portuguese Foun-
risk even during
dation for Science & Technology
(Fundação para a Ciência e Tecno- financial crises.
logia [FCT]) under project PTDC
/EGE-GES/121377/2010. We are
indebted to two anonymous reviewers, as well as
to Professor Chris Brewster (University of Reading,
United Kingdom) and Professor Chris Adcock
(University of Sheffield, United Kingdom), for
their comments on earlier versions of this arti-
cle. We also acknowledge the contribution of
the participants of the 2012 IFSAM Congress,
the 2012 PFN Conference, and the 2013 INBAM
Conference.

ANA CARVALHO is an assistant professor of strategic human resource management at the

School of Economics and Management, University of Minho (Portugal). Her PhD is in man-
agement (human resource management) from the University of Minho. Her research inter-
ests include strategic human resource management, third-sector organizations and volunteer
management, and management education. She has published in such journals as Personnel
Review, Voluntas, Higher Education, British Journal of Educational Technology, and Teaching
in Higher Education.

NELSON AREAL is an assistant professor of finance at the School of Economics and Manage-
ment, University of Minho (Portugal). He obtained his PhD in accounting and finance from
Lancaster University (United Kingdom). His research interests are in risk measures and fore-
casting, option valuation using numerical methods, financial performance measurement, and

Human Resource Management DOI: 10.1002/hrm

496 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2016
socially responsible investments. His work has appeared in various international journals,
such as the European Journal of Finance, International Journal of Finance & Economics,
Journal of Futures Markets, Journal of Business Ethics, Review of Derivatives Research, and
Quantitative Finance.
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Human Resource Management DOI: 10.1002/hrm