ESG as an Organizational Reputation Signal:A Study on Employee Turnover Intention and Instrumentality Perception

Abstract

As the social and environmental role of the corporation in society has been emphasized, many firms have sought to achieve good social and environmental reputations. Based on signaling theory and organizational reputation literature, this study examines how ESG (environmental, social, and government) reputations function as an important signal that reduces employees’ turnover intentions. Additionally, a mediating role in employees’ reputation awareness and a moderating role in their reputation instrumentality perception are further investigated. For the study, we collected organizational reputation information from a secondary source and conducted an online survey of 987 employees from 31 companies. By analyzing a multilevel model using MPlus software, we found strong support for our hypotheses. The ESG reputation of a company reduced its employees’ turnover intentions and employees’ awareness of their company’s ESG behaviors mediated the relationship. In addition, we found that employees’ beliefs in the importance of ESG behaviors on the long-term survival of their company, that is, ESG reputation instrumentality, positively moderated the mediation relationship. These findings suggest that signaling theory and organizational reputation literature at the organizational level can be consistently applied to employees at the individual level. We also discuss the theoretical contributions and practical implications of our study.