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, consistent with private information about upcoming earnings being disseminated through employee networks. We employ three complementary identification strategies: exploiting exogenous variation in higher-order connections, using the enactment of the Kim Young-ran Act as an adverse shock to networking activities, and leveraging brokerage mergers as an exogenous deterioration in the information environment. All three strategies corroborate our baseline findings. Further analyses reveal that this effect is driven primarily by positive earnings news, the firm-specific component of earnings, and the connections of mid-level managers. Consistent with the strength of weak ties theory, our results are stronger for weaker professional connections. Finally, we find that the stock prices of more-connected firms incorporate information about forthcoming earnings more quickly and exhibit lower post-earnings announcement drift. Overall, our results suggest that employee networks facilitate the dissemination of earnings information, leading to more efficient stock prices.

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. To support a causal interpretation, we exploit the 2017 Tax Cuts and Jobs Act, which disproportionately weakened charitable-giving incentives for high-income households, reducing donations to and engagement with local associations, through which residents build and sustain LSC. We validate this strategy by showing resident visits to these associations decline in more-exposed counties following the reform and find that acquisition intensity rises in those counties. We further identify mechanisms: acquirers in high-LSC regions avoid geographically or industry-proximate targets risking antitrust scrutiny, match with socially responsible targets, and rely less on stock payments when overvalued. Our findings highlight how community preferences operate as informal institutions that govern corporate decisions, contributing to the debate over corporate objectives and stakeholder orientation.

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.