Firms with strong flexible work options have improved fortunes in the stock market, according to researchers at the University of Melbourne.
The university’s assistant professor of finance, Gabriele Lattanzio, found a correlation between companies ranked highly for flexible work opportunities and companies with higher share prices.
“This study documents for the first time that firms’ reliance on alternative work arrangements is associated with superior long-horizon stock market returns beyond what can be explained by other systematic risk factors,” Lattanzio wrote.
Lattanzio studied the share price of firms following the publication of the ‘100 Best Companies for Remote Working Jobs’ list each year, developed by remote work site FlexJobs and released annually by Forbes.
In doing so, he discovered that companies that gained a place on the list saw improved value in the market.
“By constructing portfolios at the end of the month in which the ranking is published by Forbes, we document that portfolios of firms engaging in this strategy display a significant outperformance, which appears to be robust to a wide array of specifications,” Lattanzio said.
Building on his analysis, Lattanzio suggested that corporate reliance on flexible work arrangements is beneficial to companies due to its effect on staff satisfaction, productivity, and operational flexibility.
As these benefits are not tangible, however, stock prices are only affected when working from home (WFH) can be seen to have a real-world impact, such as superior returns or accounting performance.
“Alternative work arrangements – and, in particular, WFH provisions - might result in superior stock market performance if (1) they yield productivity gains through their effect on employees wellbeing and on operational efficiency and flexibility, and (2) if such an effect is not immediately priced by the market,” Lattanzio said.
A new front in the RTO debate
This research presents a potential conundrum for CEOs who have been pushing hard on return to office (RTO) mandates over the last few months, adding a potential financial incentive to a viewpoint they oppose.
AWS CEO Matt Garman made his stance clear recently, saying employees not willing to succumb to RTO mandates should leave the company and look elsewhere for work.
Garman’s comments align with that of Amazon CEO Andy Jassy, who recently broke news to Amazon staff that the firm would be enforcing a five-day week in the office.
Other firms such as Dell have also rolled out strict RTO policies that prompted a fierce backlash among workers.
Music streaming giant Spotify, on the other hand, has said it trusts its staff to be productive when WFH, with the firm’s HR lead publicly resisting the idea of treating employees as children.
