Labor Market Benefit of Disaggregated Disclosure

59 Pages Posted: 14 Sep 2020 Last revised: 11 Mar 2022

See all articles by Sean Cao

Sean Cao

University of Maryland - Robert H. Smith School of Business

Yinghua Li

Arizona State University (ASU) - School of Accountancy

Guang Ma

McGill University - Desautels Faculty of Management

Multiple version iconThere are 2 versions of this paper

Date Written: February 1, 2022

Abstract

Asymmetric information is a fundamental friction that results in mismatches and efficiency losses in the labor market. In this study, we posit that more disaggregated financial disclosure by a CEO candidate’s prior employer can help the hiring firm better assess the possible fit between its operational needs and the candidate’s skill set. Using a mandatory segment reporting reform in the U.S. (SFAS 131) as an exogenous shock to disclosure disaggregation, we find a significant increase in the firm-CEO match quality when the hiring firm has access to more disaggregated segment information about the external candidate’s past employment. Further, the improvement in firm-CEO matching is greater when segment information is incrementally more useful for evaluation of candidate skills. These findings reveal a novel labor market benefit of disaggregated financial disclosure: alleviating pre-hiring information deficiencies and facilitating efficient allocation of CEO talent across firms.

Keywords: asymmetric information, disclosure disaggregation, matching, labor market frictions, CEO hiring, executive labor market

JEL Classification: D82, D83, M41, J23, J24

Suggested Citation

Cao, Sean S. and Li, Yinghua and Ma, Guang, Labor Market Benefit of Disaggregated Disclosure (February 1, 2022). Available at SSRN: https://ssrn.com/abstract=3686366 or http://dx.doi.org/10.2139/ssrn.3686366

Sean S. Cao

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Yinghua Li

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States
480-965-5188 (Phone)

HOME PAGE: http://wpcarey.asu.edu/people/profile/2386522

Guang Ma (Contact Author)

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St W
Montreal, Quebec h3A 1G5
514-398-5075 (Phone)

HOME PAGE: http://guangma.info

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
238
Abstract Views
1,385
rank
182,216
PlumX Metrics