Labor Reactions to Financial Distress: Evidence from LinkedIn Activity

35 Pages Posted: 10 Oct 2019 Last revised: 31 Oct 2019

See all articles by Jeff Gortmaker

Jeff Gortmaker

affiliation not provided to SSRN

Jessica Jeffers

University of Chicago - Booth School of Business

Michael Junho Lee

Federal Reserve Banks - Federal Reserve Bank of New York

Date Written: September 18, 2019

Abstract

We investigate workers' reactions to signals of their firms' financial condition using anonymized networking activity on LinkedIn. We show significant increases in weekly connection formation following the announcement of possible impending downgrades to a firm's credit rating. More senior, more skilled, and less mobile workers have the strongest reactions, but increased connection activity appears in both workers who leave and workers who stay at the firm. Reactions to firms' financial conditions are asymmetric: we do not find evidence of a change in networking activity for positive credit rating news. We also do not find similar reactions following economic signals such as missed earnings. These results point to possible unique labor implications of debt financing.

Suggested Citation

Gortmaker, Jeff and Jeffers, Jessica and Lee, Michael Junho, Labor Reactions to Financial Distress: Evidence from LinkedIn Activity (September 18, 2019). 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 Junho Lee

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

33 Liberty Street
New York, NY 10045
United States

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