Financial Reporting and Employee Job Search

Abstract

We investigate the effects of financial reporting on current employee job search, that is, whether firms' public financial reports cause their employees to reevaluate their jobs and consider leaving. We develop theory for why current employees use earnings announcements (EAs) to inform job search decisions, and empirically investigate job search based on employees' activity on a popular job market website. We find that job search by current employees increases significantly during EA weeks, especially when employees are more mobile and when their information frictions are greater. We also find that employees use EAs to update their expectations about their employers' economic prospects, consistent with learning, and some evidence that positive announcements elicit less search. Our paper contributes to the burgeoning

Using and Interpreting Fixed Effects Models

“…The firm-quarter FE eliminate substantial variation in Y across firms and quarters, but are orthogonal to X given that each firm-quarter has exactly one earnings announcement. Thus, the firm-quarter FE in deHaan, Li, and Zhou [2023a] do not reduce the variation in the X of interest, so solely have the effect of increasing test power. 23 Random effects models can also be used in cases where z g is correlated with Y but uncorrelated with x i,t .…”

“…In sum, we typically face a tradeoff when using FE: They often simultaneously reduce both bias and power. In the usual case in which we are 22 deHaan, Li, and Zhou [2023a], for example, examine employee job searches (Y ) following earnings announcements (X ), and use firm-quarter FE to isolate variation in search during earnings announcement weeks relative to the trailing weeks within the same firm-quarter. The firm-quarter FE eliminate substantial variation in Y across firms and quarters, but are orthogonal to X given that each firm-quarter has exactly one earnings announcement.…”

Financial Reporting Quality and Wage Differentials: Evidence from Worker‐Level Data

“…They can infer it from many different sources, such as information sharing from other workers (through online job sites, for example), news media, or salient events, like restatements. Studies argue that employees perceive the importance of accounting numbers for their compensation and prospects at the firm (e.g., Liberty and Zimmerman [1986], Dou, Khan, and Zou [2016], Malik [2023], deHaan, Li, andZhou [2023]).…”