Does a Change in the Information Environment Affect Labor Adjustment Costs?

45 Pages Posted: 5 Oct 2018 Last revised: 30 Jun 2020

See all articles by Ben R. Marshall

Ben R. Marshall

Massey University - School of Economics and Finance

Justin Hung Nguyen

Victoria University of Wellington

Nhut H. Nguyen

Auckland University of Technology

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance

Date Written: October 25, 2019

Abstract

We consider how a firm’s information environment impacts an index of three proxies for the costs firms incur when adjusting their workforce. We show companies with less information asymmetry have lower labor adjustment costs (LACs). Moreover, this relation is stronger for firms with lower financing constraints and stronger financial performance and growth, which suggests these attributes are particularly appealing to employees. Our difference-in-differences tests based on two exogenous asymmetric information shocks around broker mergers and closures, and decimalization indicate the link is likely causal. Finally, we show that LACs are an important channel through which information asymmetry impacts firm value.

Keywords: Information Environment, Information Asymmetry, Labor Adjustment Costs

JEL Classification: G11, J20

Suggested Citation

Marshall, Ben R. and Nguyen, Justin Hung and Nguyen, Nhut H. and Visaltanachoti, Nuttawat, Does a Change in the Information Environment Affect Labor Adjustment Costs? (October 25, 2019). Available at SSRN: https://ssrn.com/abstract=3244784 or http://dx.doi.org/10.2139/ssrn.3244784

Ben R. Marshall (Contact Author)

Massey University - School of Economics and Finance ( email )

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Justin Hung Nguyen

Victoria University of Wellington ( email )

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Nhut H. Nguyen

Auckland University of Technology ( email )

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Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance ( email )

School of Economics and Finance
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Auckland
New Zealand
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