Local Employment Opportunities and Corporate Retention Policies

58 Pages Posted: 16 Jan 2020

See all articles by Kyeong Hun Lee

Kyeong Hun Lee

Norwegian School of Economics (NHH) - Department of Finance

Karin S. Thorburn

Norwegian School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Qianying(Emma) Xu

University of Texas at El Paso

Date Written: December 23, 2019

Abstract

We construct a measure of employees’ outside opportunities within the local labor market and examine how firms choose policies to retain employees with such opportunities. We find that firms grant more rank and file stock options, provide a more employee-friendly work environment, and maintain higher levels of financial flexibility (higher cash balances and lower financial leverage) when employees have more outside options in the local labor market. These relations are stronger among firms relying more on high skill workers and investing more in research and development. In a quasi-natural experiment involving employee mobility shocks following the adoption of Inevitable Disclosure Doctrine by U.S. state courts, we further show that the recognition of the doctrine attenuates the effects of our measure of employees’ outside opportunities on the retention policies.

Keywords: Labor Force Composition, Stock Options, Corporate Social Responsibility, Working Conditions, Financing

JEL Classification: G32, J21, J33, J42, M14

Suggested Citation

Lee, Kyeong Hun and Thorburn, Karin S. and Xu, Qianying(Emma), Local Employment Opportunities and Corporate Retention Policies (December 23, 2019). Available at SSRN: https://ssrn.com/abstract=3511607 or http://dx.doi.org/10.2139/ssrn.3511607

Kyeong Hun Lee (Contact Author)

Norwegian School of Economics (NHH) - Department of Finance ( email )

Helleveien 30
N-5045 Bergen
Norway

Karin S. Thorburn

Norwegian School of Economics ( email )

Helleveien 30
N-5045 Bergen
Norway
+4755959283 (Phone)

HOME PAGE: http://www.nhh.no/cv/thorburn

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Qianying(Emma) Xu

University of Texas at El Paso ( email )

500 W University Ave
El Paso, TX 79902
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
43
Abstract Views
207
PlumX Metrics