Labor Reactions to Credit Deterioration: Evidence from LinkedIn Activity

86 Pages Posted: 10 Oct 2019 Last revised: 21 Mar 2022

See all articles by Jeff Gortmaker

Jeff Gortmaker

affiliation not provided to SSRN

Jessica Jeffers

University of Chicago - Booth School of Business

Michael Lee

Federal Reserve Banks - Federal Reserve Bank of New York

Date Written: March 1, 2022

Abstract

We analyze worker reactions to firms' credit deterioration. Using weekly anonymized networking activity on LinkedIn, we show workers initiate more connections immediately following a negative credit event, even at firms far from bankruptcy. Our results suggest that workers are driven by concerns about both unemployment and future prospects at their firm. Heightened networking activity is associated with contemporaneous and future departures, especially at highly-rated firms. Other negative events like missed earnings and equity sell recommendations do not trigger similar reactions. Overall, our results indicate that the latent build-up of connections triggered by credit deterioration represents a source of fragility for firms.

Keywords: Network formation, Credit deterioration, Labor & finance, Financial distress, Labor fragility

JEL Classification: G32, G33, J6, D85, M50

Suggested Citation

Gortmaker, Jeff and Jeffers, Jessica and Lee, Michael, Labor Reactions to Credit Deterioration: Evidence from LinkedIn Activity (March 1, 2022). Available at SSRN: https://ssrn.com/abstract=3456285 or http://dx.doi.org/10.2139/ssrn.3456285

Jeff Gortmaker

affiliation not provided to SSRN

Jessica Jeffers (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Michael Lee

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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