Corporate Purpose and Financial Performance

Claudine Gartenberg (Wharton School/NYU Stern)
Andrea Prat (Columbia University)
George Serafeim (Harvard Business School)

Abstract: We construct a measure of corporate purpose within a sample of US companies based on approximately 500,000 survey responses of worker perceptions about their employers. We find that this measure of purpose is not related to financial performance. However, high purpose firms come in two forms: firms characterized by high camaraderie between workers and firms characterized by high clarity from management. We document that firms exhibiting both high purpose and clarity have systematically higher future accounting and stock market performance, even after controlling for current performance, and that this relation is driven by the perceptions of middle management and professional staff rather than senior executives, hourly or commissioned workers. Taken together, these results suggest that firms with mid-level employees with strong beliefs in the purpose of their organization experience better performance.