Employee Turnover and Firm Performance: Large-Sample Archival Evidence

54 Pages Posted: 9 Jan 2020 Last revised: 10 Dec 2020

See all articles by Qin Li

Qin Li

Hong Kong Polytechnic University

Ben Lourie

University of California, Irvine

Alexander Nekrasov

University of Illinois at Chicago

Terry J. Shevlin

University of California-Irvine

Date Written: December 8, 2020

Abstract

Employee turnover is a significant cost for businesses and a key human capital metric, but firms do not disclose this measure. We examine whether turnover is informative about future firm performance using a large panel of turnover data extracted from employees’ online profiles. We find that turnover is negatively associated with future financial performance (one-quarter ahead ROA and sales growth). The negative association between turnover and future performance is stronger for small firms, for young firms, for firms with low labor intensity, when the local labor market is tight, and when the firm is trying to replace departing employees. The negative association disappears when turnover is very low, suggesting that a certain amount of turnover can be beneficial. Consistent with the concern that turnover increases operational uncertainty, we find a positive association between turnover and the uncertainty of future financial performance. Finally, we find a significant association between turnover and future stock returns, suggesting that investors do not fully incorporate turnover information. Our findings answer the call from the SEC to determine the importance of turnover disclosure.

Keywords: human capital, employee turnover, retention, employee disclosure, firm performance, uncertainty, stock returns

JEL Classification: M40, M41

Suggested Citation

Li, Qin and Lourie, Ben and Nekrasov, Alexander and Shevlin, Terry J., Employee Turnover and Firm Performance: Large-Sample Archival Evidence (December 8, 2020). Available at SSRN: https://ssrn.com/abstract=3505626

Qin Li

Hong Kong Polytechnic University ( email )

Hung Hom
Hong Kong
Hong Kong

Ben Lourie

University of California, Irvine ( email )

Irvine, CA 92697-3125
United States

Alexander Nekrasov (Contact Author)

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60607
United States

HOME PAGE: http://business.uic.edu/profiles/alexander-nekrasov/

Terry J. Shevlin

University of California-Irvine ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States
2065509891 (Phone)

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