Labor Reactions to Credit Deterioration: Evidence from LinkedIn Activity

47 Pages Posted: 10 Oct 2019 Last revised: 6 Aug 2020

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: January 15, 2020

Abstract

We examine workers' reactions to signals of their firms' credit deterioration using anonymized networking activity on LinkedIn. We show significant increases in weekly connection formation after firms are placed on negative credit watch or downgraded. Other negative events like missed earnings and equity sell recommendations do not trigger similar changes in networking activity, and results are not limited to firms in imminent financial distress. Our results appear consistent with a precautionary motive for networking. We find connection-making is associated with higher concurrent and future departures, though it also goes up for employees who stay. Reactions are stronger for more senior and skilled employees.

Keywords: Network formation, Credit ratings, Credit deterioration, Labor & finance

Suggested Citation

Gortmaker, Jeff and Jeffers, Jessica and Lee, Michael, Labor Reactions to Credit Deterioration: Evidence from LinkedIn Activity (January 15, 2020). 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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