Information Dispersion Across Employees and Stock Returns

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: 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