Employees’ voluntary disclosures about business outlook and labor investment efficiency

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2022
Authors
Zhang, Jiarui Iris
Jung, Boochun
Wang, Yiding
Wei, Sijing
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We examine how employee business outlook affects firm-level labor investment efficiency by using data from Glassdoor. We hypothesize that due to the popularity and informativeness of employee voluntary disclosure through social media as a form of crowd wisdom in labor markets, more positive business outlook disclosed by employees can significantly reduce firms’ labor adjustment costs by attracting more job applicants in a timely matter, resulting in higher labor investment efficiency. Consistent with the hypothesis, we document that positive employee business outlook enhances labor investment efficiency by reducing both over-investment and under-investment in labor. Extending our first hypothesis, we also hypothesize and find that when peer firms’ employee business outlook is more positive than that of focal firms, focal firms’ labor adjustment costs increase because of the relative disadvantage in obtaining talented labor in labor markets, resulting in less efficient labor investment. We mitigate the endogeneity concerns by employing sub-sample analysis and using Anti-SLAPP laws as an exogenous shock.
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Voluntary disclosure, Employees, Business outlook, Glassdoor, Labor investment efficiency, Labor adjustment costs
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