Information Dispersion Across Employees and Stock Returns

49 Pages Posted: 29 May 2018

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: May 15, 2018

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. Our findings are driven by specific types of workers, such as scientists, engineers, and middle managers. Higher labor outflows also predict higher operating expenses and lower earnings per share. Equity analysts, however, repeatedly fail to forecast these outcomes. The evidence is consistent with a model of job search in which employees observe dispersed information about the firm's productive capabilities.

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 (May 15, 2018). Kelley School of Business Research Paper No. 18-47. 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 )

United Kingdom

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