Financial Disclosure Transparency and Employee Wages
The Financial Review, Forthcoming
47 Pages Posted: 23 Jan 2018 Last revised: 7 Jun 2022
Date Written: June 7, 2022
We test the hypothesis that less transparent financial disclosures are an undesirable firm attribute that increase the amount of information and unemployment risk that employees bear, resulting in a wage premium. Using establishment-level wage data from the U.S. Census Bureau, we document that firms with less transparent disclosures pay their employees more, especially when employees bear greater information acquisition costs, have more influence in the wage-setting process, and own more stock. Our results hold after utilizing instrumental variables and exploiting two quasi-natural experiments. Overall, our results suggest that disclosure choices can generate externalities on an important group of stakeholders.
Keywords: Transparency, Disclosures, Employee Wages, Management Forecasts, Readability
JEL Classification: M40, M41, J31
Suggested Citation: Suggested Citation