Accounting for Employee Flows

Jeppe Christoffersen*, Thomas Plenborg, Morten Seitz

*Corresponding author for this work

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This paper examines employee flows and the association with firm earnings and interest rates. We use administrative employer–employee matched panel data from Denmark spanning 17 years and hence exploit actual data on employee arrivals (labor inflows) and departures (labor outflows). Three main findings emerge. First, we condition by firms’ economic conditions. Departures predict earnings increases for prior-year loss firms, while they predict earnings decreases for prior-year profit firms, suggesting that this conditioning can help explain the mixed results in the literature. Arrivals predict earnings increases, though only for prior-year profit firms. These effects are stronger for high-paid employees than for low-paid ones. Second, the effects of departures are generally larger than the effects of arrivals, consistent with departures disrupting operations. Third, we find that lenders price employee flow information but only for departures of high-paid employees, despite the predictive ability of the flow of other employees for future earnings. Overall our results suggest that employee flows predict firm financial performance but are only partially priced by lenders.
Original languageEnglish
JournalJournal of Business Finance & Accounting
Issue number5/6
Pages (from-to)943-972
Number of pages30
Publication statusPublished - May 2023

Bibliographical note

Published online: 1 December 2022.


  • Human capital
  • Labor flows
  • Turnover
  • Hires
  • Credit markets

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