The Relevance and Reliability of Employee Business Outlook Disclosures

54 Pages Posted: 30 Jun 2019 Last revised: 22 Jul 2019

See all articles by Yun Fan

Yun Fan

University of Oklahoma - Steed School of Accounting

Yuan Ji

The Hong Kong Polytechnic University

Wayne B. Thomas

University of Oklahoma

Chong Wang

University of Kentucky

Date Written: July 22, 2019

Abstract

We examine disclosures of business outlook by rank-and-file employees on Glassdoor.com. Glassdoor.com is a social media platform where employees can share their views publicly and anonymously. We find that employee disclosures are more highly associated with loan spreads in private lending agreements as those disclosures become more relevant to lenders’ decisions (i.e., when the borrowing firm has higher information opacity, has more dispersed operations, or is more financially constrained) and as those disclosures become more reliable (i.e., as the number of employee ratings increases, when those ratings are based proportionately more on current employees, and when firms have a larger labor force.). The results are consistent with employee disclosures providing useful inside information that otherwise may not have been disclosed publicly by upper-level managers. The rapid growth in information disclosed on social media platforms provides researchers an important and interesting setting to explore how alternative sources of information may be generated and disseminated by various stakeholders.

Keywords: Employee opinions, voluntary disclosures, wisdom of the crowd, debt contracting, loan pricing, private loans

JEL Classification: D82, D83, G10, G21, M40, M41

Suggested Citation

Fan, Yun and Ji, Yuan and Thomas, Wayne B. and Wang, Chong, The Relevance and Reliability of Employee Business Outlook Disclosures (July 22, 2019). Available at SSRN: https://ssrn.com/abstract=3411883 or http://dx.doi.org/10.2139/ssrn.3411883

Yun Fan (Contact Author)

University of Oklahoma - Steed School of Accounting ( email )

307 W Brooks
Norman, OK 73019
United States

Yuan Ji

The Hong Kong Polytechnic University ( email )

Hung Hom
Kowloon, Hong Kong
Hong Kong

Wayne B. Thomas

University of Oklahoma ( email )

Michael F. Price College of Business,
307 W Brooks, Rm 212B
Norman, OK 73019
United States
405-325-5789 (Phone)
405-325-7348 (Fax)

Chong Wang

University of Kentucky ( email )

Lexington, KY 40506
United States

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