Information Dispersion Across Employees and Stock Returns

Review of Financial Studies, forthcoming

66 Pages Posted: 29 May 2018 Last revised: 22 Jun 2020

See all articles by Ashwini K. Agrawal

Ashwini K. Agrawal

London School of Economics & Political Science (LSE)

Isaac Hacamo

Indiana University - Kelley School of Business - Department of Finance

Zhongchen Hu

London School of Economics & Political Science (LSE) - Department of Finance

Date Written: January 12, 2020

Abstract

Rank-and-file employees are becoming increasingly critical for many firms, yet we know little about how their employment dynamics matter for stock prices. We analyze new data from the individual CV’s of public company employees, and find that rank-and-file labor flows can be used to predict abnormal stock returns. Accounting data and survey evidence indicate that workers’ labor market decisions reflect information about future corporate earnings. Investors, however, do not appear to fully incorporate this information into their earnings expectations. The findings support the hypothesis that rank-and-file employees’ entry and exit decisions convey valuable insight into their employers’ future stock performance.

Keywords: Stock Returns, Employees, Labor Flows, Information

JEL Classification: G00, G10, G12, G14, G30

Suggested Citation

Agrawal, Ashwini K. and Hacamo, Isaac and Hu, Zhongchen, Information Dispersion Across Employees and Stock Returns (January 12, 2020). Review of Financial Studies, forthcoming, Available at SSRN: https://ssrn.com/abstract=3180578 or http://dx.doi.org/10.2139/ssrn.3180578

Ashwini K. Agrawal (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Isaac Hacamo

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-7842 (Phone)

HOME PAGE: http://hacamo.weebly.com/

Zhongchen Hu

London School of Economics & Political Science (LSE) - Department of Finance ( email )

CON.1.17
Houghton St.
London, WC2A 2AE
United Kingdom

HOME PAGE: http://sites.google.com/view/zhongchen-hu

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