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. Our findings are driven by specific types of workers, such as scientists, engineers, and middle managers. Higher labor outflows also predict higher operating expenses and lower earnings per share. Equity analysts, however, repeatedly fail to forecast these outcomes. The evidence is consistent with a model of job search in which employees observe dispersed information about the firm's productive capabilities.