People tip better when their employer’s stocks go up
New research from Binghamton University finds that employees of public companies tip taxi drivers more when their employer’s stocks are trading higher.
The study aimed to show the impact of a firm’s stock performance on its surrounding community. By studying taxi tips, which are given out of a sense of goodwill and not an expectation of better service, researcher Cihan Uzmanoglu, an associate professor at Binghamton’s School of Management, wanted to know whether a company’s stocks going up meant that its employees would spend more in general.
The paper argues that the success of publicly traded companies does in fact trickle down to communities through spending by company employees. The increased tipping is even greater when a firm’s employees are given more stock-based compensation, implying that employees with more to gain from their company’s stock performance are even more likely to spread that wealth.
“Employee spending is an important economic driver for the location where a business is located, Uzmanoglu said, according to a post on Binghamton’s website. “If employees are doing well, they are likely to spend more money in that local economy.”
Uzmanoglu looked at about two million New York City taxi trips that began within a hundred meters (or, a little more than 300 feet) of a publicly traded company, mostly between 5 and 6 in the evening when employees would be leaving work. When a company’s stock went up, the taxi riders near its headquarters tipped more, on average.
Other findings from the paper:
- Tipping also increased after a company’s initial public offering.
- Tipping did not “decrease significantly” when a firm’s stock went down, indicating that tippers still adhere to minimum tipping etiquette, even when a stock has lackluster days.
- The increases in tips could be traced to individual companies’ performances, instead of to industry-wide or market trend.
The research was published in the Journal of Empirical Finance.
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