ESG Disclosure and Employee Turnover. New Evidence from Listed European Companies

Summary

We explored how company transparency, as measured by ESG (Environmental, Social and Governance) disclosure, affected the employee turnover of 212 multinational corporations that were listed in the European capital market during the 2010-2017 period. We also examined the role of the business environment by looking at the company’s ESG reporting system and its economic sector. To analyze how ESG disclosure affected employee turnover at any point of its conditional distribution, we used a panel data quantile regression model. ESG disclosure was found to be negatively associated with employee turnover. Employee turnover, as well as the extent to which it is affected by ESG disclosure, was found to depend strongly on the conditional distribution of the turnover rate, the sector and whether ESG disclosure is mandatory or voluntary. Our findings were confirmed by a robustness check analysis. In conclusion, the relationship between company transparency and employee turnover depends strongly on the institutional context and, especially, on disclosure regulation. The more a company is scrutinized, the more it will try to be socially responsible to maintain and/or improve its reputation and thus reassure and satisfy its stakeholders.

Abstract

We sought to analyze the relationship between ESG (Environmental, Social and Governance) disclosure and employee turnover. We also examined how this relationship is affected by regulation of ESG reporting and by sector characteristics. A panel data quantile regression model was applied to data from 212 multinational corporations that were listed in the European capital market during the 2010-2017 period. ESG disclosure was found to be negatively associated with employee turnover. Employee turnover, as well as the extent to which it is affected by ESG disclosure, was found to depend strongly on the conditional distribution of the turnover rate, the economic sector, and whether ESG disclosure is mandatory or voluntary. A robustness check clearly confirmed our findings.

Keywords:

• ESG disclosure,
• employee satisfaction,
• employee turnover,
• panel data fixed-effect quantile regression

Résumé

Le présent article analyse l’effet de la transparence de l’entreprise sur le roulement du personnel, moyennant un échantillon de 212 sociétés multinationales cotées sur le marché européen des capitaux sur la période 2010-2017. La transparence est mesurée par la qualité de la divulgation d’informations relatives aux questions environnementales, sociales et de gouvernance (ESG). Afin d’examiner le rôle de l’environnement économique et institutionnel dans cette relation, on considère également le caractère obligatoire ou volontaire de la divulgation ESG, ainsi que le secteur d’activité. Enfin, on examine cette relation en plus grande profondeur en l’identifiant en tout point de la distribution conditionnelle de la rotation du personnel. On constate d’abord une association négative entre la divulgation d’informations ESG et le roulement du personnel. Ce dernier, ainsi que l’effet de la divulgation sur le roulement, dépendrait fortement de trois facteurs, soit la distribution conditionnelle du roulement du personnel, le secteur économique, ainsi que le caractère obligatoire ou volontaire de la divulgation ESG. Ces résultats sont confirmés par un test de robustesse. Pour conclure, la relation entre la transparence de l’entreprise et le roulement du personnel dépend fortement du contexte institutionnel et, surtout, de l’obligation de divulguer. Plus une entreprise est scrutée à la loupe, plus elle s’efforcera d’être socialement responsable pour maintenir et/ou améliorer sa réputation et ainsi rassurer et satisfaire ses parties prenantes.

Mots-clés :

• Divulgation ESG,
• Satisfaction des employés,
• rotation du personnel,
• régression quantile,
• données de panel