The Ability of Employee Disclosures to Reveal Private Information

Posted: 30 Jun 2019 Last revised: 13 Sep 2023

See all articles by Yun Fan

Yun Fan

University of Oklahoma - Steed School of Accounting

Jiajia Fu

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American)

Yuan Ji

The University of Texas at Arlington

Wayne B. Thomas

University of Oklahoma

Date Written: July 2023

Abstract

Managers may provide incomplete disclosure for various reasons (e.g., high processing costs, operating uncertainty, proprietary concerns, agency conflicts, etc.). In contrast, rank-and-file employees face fewer of these limitations. Through “wisdom of the crowd” displayed on social media, employees can aggregate their individual private beliefs to provide informative business outlook. Using employee data from Glassdoor.com, we find that employee business outlook disclosures reveal more information in loan spreads of private lending contracts when firms have more opaque information environments. Furthermore, we observe that employee disclosures help to reveal more private information when business outlook is worsening and as employees’ collective knowledge increases. This relation is more prominent when employees are expecting worsening performance, consistent with employee disclosures revealing more private bad news. Our study demonstrates the conditions under which employee disclosures on social media are more likely to disseminate private information.

Keywords: Employee opinions, crowd widsom, voluntary disclosures, information environment, business outlook

JEL Classification: D82, D83, G10, G21, M40, M41

Suggested Citation

Fan, Yun and Fu, Jiajia and Ji, Yuan and Thomas, Wayne B., The Ability of Employee Disclosures to Reveal Private Information (July 2023). Available at SSRN: https://ssrn.com/abstract=3411883 or http://dx.doi.org/10.2139/ssrn.3411883

Yun Fan (Contact Author)

University of Oklahoma - Steed School of Accounting ( email )

307 W Brooks
Norman, OK 73019
United States

Jiajia Fu

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) ( email )

1201 W. University Drive
Edinburg, TX 78541
United States

Yuan Ji

The University of Texas at Arlington ( email )

701 S. West Street
Room 409
arlington, TX TX 76010
United States

Wayne B. Thomas

University of Oklahoma ( email )

Michael F. Price College of Business,
307 W Brooks, Rm 212B
Norman, OK 73019
United States
405-325-5789 (Phone)
405-325-7348 (Fax)

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