Information Dispersion Across Employees and Stock Returns
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 reveal valuable insights into their employers' future stock performance.