What Do Employees Know? Evidence from a Social Media Platform

The Accounting Review, Forthcoming

58 Pages Posted: 17 Aug 2018 Last revised: 21 Jun 2019

See all articles by Kelly Huang

Kelly Huang

Florida International University

Meng Li

University of Texas at Dallas - Naveen Jindal School of Management

Stanimir Markov

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: May 28, 2019

Abstract

We use employee predictions of their companies’ six-month business outlook from Glassdoor.com to assess the information content of employee social media disclosures. We find that average employee outlook is incrementally informative in predicting future operating performance. Its information content is greater when the disclosures are aggregated from a larger, more diverse, more knowledgeable employee base, consistent with the wisdom of crowds phenomenon. Average outlook predicts bad news events more strongly than good news events, suggesting that employee social media disclosures are relatively more important as a source of bad news. Consistent with the organizational theory, we find systematic differences in the quantity and nature of the information in employee disclosures when the disclosures are grouped based on employee attributes and job responsibilities. Finally, average outlook predicts future returns of firms that attract less attention by analysts and investors, suggesting that investors in these firms use outlook inefficiently.

Keywords: employee knowledge, job function, social media, wisdom of the crowd, stock returns

JEL Classification: M40, M41, M50

Suggested Citation

Huang, Kelly and Li, Meng and Markov, Stanimir, What Do Employees Know? Evidence from a Social Media Platform (May 28, 2019). The Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3225957 or http://dx.doi.org/10.2139/ssrn.3225957

Kelly Huang

Florida International University ( email )

11200 SW 8th Street
Miami, FL 33199
United States

Meng Li (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 W Campbell Road
Richardson, TX 75083-0688
United States
(972)883-2492 (Phone)

Stanimir Markov

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States
972 883 5166 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
604
Abstract Views
2,860
rank
56,272
PlumX Metrics