| Abstract: |
We find that SFAS 131, which required the disclosure of disaggregated financial information, led to a stark reduction in employee movement to competitors. Our findings collectively suggest the reduction in the labor movement is driven by disaggregated financial information substituting the need for companies to hire competitors’ employees to obtain proprietary information. Specifically, the reduction is more pronounced when competitors download the disclosing firm’s financials more after SFAS 131, consistent with competitors consuming proprietary information via public sources, as opposed to through employee hiring. Moreover, the reduction is stronger among business employees who likely possess proprietary financial information as opposed to scientists and engineers, consistent with SFAS 131 substituting for business-related, instead of technological, information. In line with SFAS 131 reducing the informational value of employees to competitors, affected employees are significantly less likely to be promoted. Inconsistent with labor market trends explaining these patterns, we fail to find similar effects among employee movement to noncompetitors. Taken together, we document a novel link between mandatory disclosure and the labor market via their substitutive relationship in transferring proprietary information to competitors.
Keywords: Disclosure regulation; proprietary information; labor mobility
JEL classification: J23, J40, M41
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Biography:
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Prof. Yucheng (John) Yang is an Assistant Professor of Accounting at the Chinese University of Hong Kong (CUHK). Before he joined CUHK in 2021, he received his BA degree in Economics (honor) and Mathematics from Lewis and Clark College, MA degree in Economics from the University of California, Davis, and MS and PhD degrees in Business Administration from Simon Business School at the University of Rochester. His research speaks to issues related to financial disclosure and regulations, the behavior of financial intermediaries, the macroeconomic implications of accounting information, and the impacts of tax enforcement on corporate behaviors.
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