Labor Market Peer Firms: Understanding Firms' Labor Market Linkages Through Employees' Internet 'Also Viewed' Firms

85 Pages Posted: 1 Feb 2015 Last revised: 26 Jan 2024

See all articles by Nan Li

Nan Li

University of Toronto - Rotman School of Management; University of Toronto at Scarborough - Division of Management

Date Written: July 1, 2014

Abstract

This paper studies the grouping of firms based on their labor-market connections, a significant departure from the traditional approach of grouping based on product-market connections. It also proposes a measure of labor market peers by analyzing the "also viewed" companies on two major online labor market platforms, LinkedIn and Glassdoor. Using the labor market peer measure, I examine whether firms that hire employees with similar skills and that are presumably exposed to the same labor-related risks and shocks exhibit a strong comovement of stock returns and accounting-based performance variables. I find that labor market peers overlap but differ from traditional product-market-based industry groupings, have significant incremental power to explain stock return and accounting-based performance measure comovements, and outperform traditional industry groupings in explaining return and wage comovements when a base firm shares more labor skills with its peers. Overall, the study highlights that labor market peers capture fundamental linkages between firms that are challenging to identify using traditional industry measures.

Keywords: Peer firms, Labor market, Industry classification, Online search, LinkedIn, Glassdoor, Benchmarking

JEL Classification: D83, G0, J01, M2

Suggested Citation

Li, Nan, Labor Market Peer Firms: Understanding Firms' Labor Market Linkages Through Employees' Internet 'Also Viewed' Firms (July 1, 2014). Rotman School of Management Working Paper No. 2558271, Available at SSRN: https://ssrn.com/abstract=2558271 or http://dx.doi.org/10.2139/ssrn.2558271

Nan Li (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-946-3126 (Phone)

University of Toronto at Scarborough - Division of Management ( email )

1265 Military Trial
Scarborough, Ontario M1C 1A4
Canada

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