Cause and Effect Relationship of Share Holder Value Creation and Employee Satisfaction for U.S. Banks

In this paper, we investigate the causal relationship between employee satisfaction and shareholder value creation (SHVC) within the context of U.S. banks. While previous studies [1], [2] have suggested that financial markets may not fully incorporate a firm's employee satisfaction in stock pricing, our research further contributes to this literature in two crucial ways. Firstly, we leverage the Toda Yamamoto causality test (TYCT) to scrutinize the cause and effect dynamics between SHVC and employee satisfaction within U.S. banks. Secondly, we incorporate the Tobin Q ratio as an additional measure of SHVC. In our analysis, we discovered that the causal relationship between intangible assets, such as employee satisfaction, and the Tobin Q ratio was not unidirectional but reciprocal for a subset of U.S. banks during the period from 2015 to 2019. This indicates that while employee satisfaction influenced the Tobin Q ratio, the latter also exerted a causal effect on the former for some banks.