Job Search with Financial Information: Theory and Evidence

We study how job seekers use firm financial information during the job search process to learn job prospects. In the spirit of Beaver (1968), we find first evidence of a substantial increase in job search activity around earnings announcements for firms with earnings growth. With detailed job posting data, we document that financial information is predictive of future job prospects including job growth, career growth, and professional development. We also find that job seekers acquire financial information during the job application and interview period. Spurred by these findings, we develop a theoretical model of job search paired with firms’ heterogeneous earnings. We find the empirical evidence consistent with the prediction of the model that job seekers trade off the probability of an offer with the value of the employment contract while applying for a high-performing firm and intensify information acquisition as the number of available positions shrinks relative to the pool of job seekers. Using numerical analyses, we discuss the implications of the model for equilibrium outcomes (e.g., firm heterogeneity and wage distribution).