Labor Reactions to Credit Deterioration: Evidence from LinkedIn Activity
80 Pages Posted: 10 Oct 2019 Last revised: 9 Nov 2021
Date Written: November 8, 2021
We examine worker reactions to firms' credit deterioration using weekly anonymized networking activity on LinkedIn. We show workers start initiating more connections immediately following a negative credit event, even at firms that are far from bankruptcy. This 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 ratings, Credit deterioration, Labor & finance
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