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Working Paper
Competitors' Stock Price Reaction to Mass Layoff Announcements
Using data on layoff announcements by S&P 500 firms, we show that layoff announcements mostly contain industrywide news. Competitors? stock price reactions are positively correlated with the announcer?s returns. This contagion effect is stronger for competitors whose values depend on growth opportunities. When layoff announcements induce positive stock returns to announcers, competitors with positive R&D see a 1.15% increase in their returns. Conversely, when announcements induce negative reactions to announcers, competitors with high sales growth see a reduction of 1.09% in returns. Our ...
Working Paper
Organizations, Skills, and Wage Inequality
We extend an on-the-job search framework in order to allow firms to hire workers with different skills and skills to interact with firms? total factor productivity (TFP). Our model implies that more productive firms are larger, pay higher wages, and hire more workers at all skill levels and proportionately more at higher skill types, matching key stylized facts. We calibrate the model using five educational attainment levels as proxies for skills and estimate nonparametrically firm-skill output from the wage distributions for different educational levels. We consider two periods in time (1985 ...
Working Paper
A Spanner in the Works: Restricting Labor Mobility and the Inevitable Capital-Labor Substitution
We model an environment with overlapping generations of labor to show that policies restricting labor mobility increase a firm's monopsony power and labor turnover costs. Subsequently, firms increase capital expenditure, altering their optimal capital-labor ratio. We confirm this by exploiting the statewide adoption of the inevitable disclosure doctrine (IDD), a law intended to protect trade secrets by restricting labor mobility. Following an IDD adoption, local firms increase capital expenditure (capital-labor ratio) by 3.5 percent (5.5 percent). This result is magnified for firms with ...
Journal Article
US Labor Market after COVID-19: An Interim Report
Headline numbers have shown that the US labor market has recovered the jobs lost during the pandemic. Nevertheless, there is significant variation in the recovery across states and counties and across occupations and industries. Using the available data from the monthly Current Population Survey and the Bureau of Labor Statistics’ State and Metro Area Employment, Hours, and Earnings for January 2019 to August 2022, we present the changing patterns in the labor market. We also highlight some possible underlying reasons that are correlated with the varying patterns across groups and space. ...
Working Paper
Dotcom Extreme Underpricing
We conjecture that the Dotcom abnormal underpricing resulted from the emergence a large cohort of firms racing for market leadership/survivorship. Fundamentals pricing at the IPO was part of their strategy. Consistent with our conjecture, firms? strategic goals and characteristics fully explain the abnormal underpricing. Contrary to alternatives explanations, underpricing was not associated with top underwriting; there was no deterioration of issuers? quality; and top underwriters and analysts became more selective.
Working Paper
Firms, Skills, and Wage Inequality
We present a model with search frictions and heterogeneous agents that allows us to decompose the overall increase in US wage inequality in the last 30 years into its within- and between-firm and skill components. We calibrate the model to evaluate how much of the overall rise in wage inequality and its components is explained by different channels. Output distribution per firm-skill pair more than accounts for the observed increase over this period. Parametric identification implies that the worker-specific component is responsible for 85 percent of this, compared to 15 percent that is ...
Working Paper
Information Production, Misconduct Effort, and the Duration of Financial Misrepresentation
We examine the link between information produced by auditors and analysts and fraud duration. Using a hazard model, we analyze misstatement periods related to SEC accounting and auditing enforcement releases (AAERs) between 1982 and 2012. Results suggest that misconduct is more likely to end just after firms announce an auditor switch or issue audited financial statements, particularly when the audit report contains explanatory language. Analyst following increases the fraud termination hazard. However, increases (decreases) in analyst coverage have a negative (positive) marginal impact on ...
Journal Article
Revisiting Wage Growth after the Recession
In this Commentary, we show that realized wage growth since 2015 has mostly been at a rate that would be expected given observed rates of inflation and labor productivity growth. Moreover, labor productivity growth has been in line with its potential over the same period. This picture of the post-recession recovery of wages is very different from the one we observed in an earlier analysis, when all we had were data up through the end of 2015. The reasons underlying the difference are large revisions in labor productivity data and upticks in the inflation rate and labor productivity growth ...
Working Paper
Oligopsonies over the Business Cycle
With a duopsony model, we show how the degree of labor market slack relates to earnings inequality and firm size distribution across local labor markets and the business cycle. In booms, due to the high aggregate productivity, there is fierce competition with resulting high wages and full employment. During recessions, there is labor market slack and firms enjoy local market power. In periods in which the economy is moving in or out of a recession, there is an “accommodation” phase, with firms shrinking their labor forces and paying lower wages instead of competing for poached workers. We ...
Working Paper
Rival Growth Prospects and Equity Prices: Evidence from Mass Layoff Announcements
We investigate the impact of mass layoff announcements on the equity value of industry rivals. When a layoff announcement conveys good (bad) news for the announcer, rivals on average witness a 0.44 percent increase (0.60 percent decrease) in cumulative abnormal stock returns. This effect is concentrated on rivals with high growth opportunities. Consistent with this finding, we also show that our results are strongest in technology industries, where growth opportunities matter the most. Our results suggest that investors perceive layoff announcements as news about industry prospects rather ...