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Using unique survey data on labor-management relations, this paper presents a new approach to estimating relational capital between firms and employees. We measure relational capital by comparing how employees perceive their firm-employee relations with how Human Resource (HR) managers illustrate. We find evidence that social scores based on ESG rating agencies are correlated with the responses by HR managers regarding firm-employee relations but not with those by employee representatives. Furthermore, the result shows that relational capital increases firm profitability measured by Return on Assets and profit margin, and labor productivity while not predicting firm survival and involuntary departure. The positive effect of relational capital on firm profitability is mostly driven by firms with higher labor productivity. However, employee retention does not function as a channel between relational capital and firm profitability. 

1. Introduction   1
2. Data   5
    2-1. Data and samples   5
    2-2. Definition of relational capital   7
    2-3. Validity tests for the measurement of relational capital   9
3. Research Design   11
    3-1. Random sampling   11
    3-2. Model specification   13
            3-2-1. Predictive regressions   13
            3-2-2. Predictive regressions with interaction terms   14
4. Empirical results   15
    4-1. Relational capital and firm profitability   15
    4-2. Channel I: Labor productivity   16
    4-3. Channel II: Retention   17
    4-4. Relational capital and firm survival   18
5. Conclusion   18
References   21
Internet Appendix   36