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Information dispersion across employees and stock returns

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  • Agrawal, Ashwini
  • Hacamo, Isaac
  • Hu, Zhongchen

Abstract

Rank-and-file employees are becoming increasingly critical for many firms, yet we know little about how their employment dynamics matter for stock prices. We analyze new data from the individual CV's of public company employees, and find that rank-and-file labor flows can be used to predict abnormal stock returns. Accounting data and survey evidence indicate that workers' labor market decisions reflect information about future corporate earnings. Investors, however, do not appear to fully incorporate this information into their earnings expectations. The findings support the hypothesis that rank-and-file employees' entry and exit decisions convey valuable insight into their employers' future stock performance.

Suggested Citation

  • Agrawal, Ashwini & Hacamo, Isaac & Hu, Zhongchen, 2020. "Information dispersion across employees and stock returns," LSE Research Online Documents on Economics 118922, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:118922
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    File URL: http://eprints.lse.ac.uk/118922/
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    References listed on IDEAS

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    1. Hertel, Tobias & Kaya, Devrimi & Reichmann, Doron, 2024. "Corporate culture and M&A deals: Using text from crowdsourced employer reviews to measure cultural differences," Journal of Banking & Finance, Elsevier, vol. 161(C).

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    More about this item

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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