Journal of Financial and Quantitative Analysis Vol. 56 No. 3 2021
Employee Flexibility, Exogenous Risk, and Firm Value
Abstract
We hypothesize that employee flexibility enhances firm value by helping firms respond to exogenous shocks. We estimate employee-flexibility scores through textual analysis of online job reviews, and we find that a high flexibility score leads to superior stock returns for firms exposed to external risk. During 2011–2017, the value-weighted hedge portfolio formed on employee flexibility earned a 5-factor annualized alpha of 9.5% during periods of high policy uncertainty. Earnings-announcement returns also suggest that investors do not fully value workforce flexibility. These results indicate that employee flexibility is a valuable corporate intangible that helps firms to manage risk during uncertain times.
- DOI
- 10.1017/s0022109019001066
- Volume
- 56
- Issue
- 3
- Pages
- 853-884
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref