DuckKi Cho

This paper investigates whether employees and their professional networks act as information intermediaries. We find that firms with more-connected employees experience smaller market reactions to earnings surprises, and these results are not due to reverse causality or information inflows. Further analyses show that employees primarily disseminate private information about positive earnings news and the firm-specific component of earnings news, and are driven largely by the connections of mid-level managers. Consistent with social networking theory, the associations are stronger for weaker professional connections. Supporting employees’ role as information intermediaries, we find that the stock prices of more-connected firms incorporate information about forthcoming earnings more quickly, have more informative retail order imbalances, and exhibit lower post-earnings announcement drift. Overall, our results suggest that more-connected firms have more efficient stock prices due to employees and their professional networks acting as information intermediaries.

Declining worker bargaining power has been advanced as an explanation for major macroeconomic shifts in the U.S., such as declining labor share, reduced consumer purchasing power, and rising inequality. This paper explores microeconomic implications, focusing on the impact of declining worker power on firm-level investment responses to a labor cost shock arising from mandated minimum wage increases. Over four decades, we observe a shift in investment-wage sensitivities from negative to insignificant as management gains flexibility through enhanced outside options. This shift is more pronounced in firms that are more exposed to globalization, technological change, and declining unionization, reflecting broader trends in weakening worker power and its influence on corporate decision-making.

We examine how local social capital (LSC)—shared norms, trust, and networks within communities—shapes firms’ acquisition decisions. Using county-level LSC measured at headquarters, we find that firms in high-LSC regions acquire less. Exploiting within-firm variation from headquarters relocations, instrumental variables, and the 2017 Tax Cuts and Jobs Act, we provide causal evidence. High-LSC acquirers avoid targets likely to trigger antitrust scrutiny, match with socially responsible targets, and rely less on stock payments when overvalued. Our findings highlight how community preferences operate as informal constraints on corporate decisions, with implications for corporate objectives and stakeholder orientation.