Employee Recommendation and Financial Performance: Evidence From Tourism and Hospitality Industry

Abstract

Employees in the tourism and hospitality industry are in close contact with customers, and they can observe the operation of the firm. Thus, employee recommendation may be able to reveal the firms’ financial performance, but firms do not disclose or even do not have this information. This study examines whether employee recommendation is informative about the financial performance of tourism and hospitality firms using employees’ online reviews. The results show that the employee recommendation rate is positively associated with the firm’s fundamental financial performance and negatively associated with the firm’s financial uncertainty. Meanwhile, the length of employees’ online reviews mediates the association between employee recommendations and firm’s financial performance. In addition, there is heterogeneity in the association between recommendations made by employees with different amounts of information about the firm and the firm’s financial performance. This study not only contributes to the research on relationships between human capital and firm performance but also provides important implications for the stakeholders of tourism and hospitality firms.