Job Search with Financial Information: Theory and Evidence

This paper examines whether, when, and why job seekers use firms' financial information in the job search process. We find first evidence of financial information's relevance to job seekers by documenting a substantial increase in job search activity around earnings announcements in the spirit of Beaver (1968). We also find that financial information acquisition by job seekers is positively related to both job postings and interviews at the firm-county-month level. Spurred by this finding, we develop a theoretical model of job search paired with firms' heterogeneous earnings to better understand job seeker's information acquisition behavior. Our model predicts that job seekers trade off the probability of an offer with the value of the employment contract and intensify information acquisition as the number of available positions shrinks relative to the pool of job seekers. Consistent with these predictions, we find that firm performance is positively correlated with both job seekers' search activities and employers' posted wages. We also find that the positive association between financial information acquisition and interviews is stronger when the job market is more competitive. Overall, these results indicate that, like capital market participants, job seekers value and use financial reporting.