Financial Reporting and Employee Job Search

Abstract

We investigate the effects of financial reporting on current employee job search; i.e., whether firms' public financial reports cause their employees to reevaluate their jobs and consider leaving. We develop a simple model in which current employees use earnings announcements to inform job search decisions, and empirically measure job search based on employees' activity on a popular job market website. We find that job search by current employees increases significantly during earnings announcement weeks, especially when employees are more mobile and when within-firm information frictions are greater. We also find that employees use earnings announcements to update their expectations about their employers' economic prospects, consistent with learning. Our paper contributes to the burgeoning labor and accounting literature by providing among the first evidence closely linking financial reports to employee learning and job search.