What Do Employees Know? Evidence from a Social Media Platform

Abstract

We use employee predictions of their companies' six-month business outlook from Glassdoor.com to assess the information content of employee social media disclosures. We find that average employee outlook is incrementally informative in predicting future operating performance. Its information content is greater when the disclosures are aggregated from a larger, more diverse, more knowledgeable employee base, consistent with the wisdom of crowds phenomenon. Average outlook predicts bad news events more strongly than good news events, suggesting that employee social media disclosures are relatively more important as a source of bad news. Consistent with the organizational theory, we find systematic differences in the quantity and nature of the information in employee disclosures when the disclosures are grouped based on employee attributes and job responsibilities. Finally, average outlook predicts future returns of firms that attract less attention by analysts and investors, suggesting that investors in these firms use outlook inefficiently.

The Effects of Tax Avoidance News on Employee Perceptions of Managers and Firms: Evidence from Glassdoor.com Ratings

“…Green et al (2019) provide further evidence that their results are driven by employees revealing information about firm fundamentals in their ratings and reviews. Hales, Moon, and Swenson (2018) and Huang, Li, and Markov (2019) also find results consistent with Glassdoor.com employee ratings on business outlook predicting earnings surprises and other income statement information. Similar to our study, Makridis and Zhou (2019) use changes in employee ratings of firms, managers and other variables as a measure of employee perceptions.…”

Employer Review Platforms – Do the Rating Environment and Platform Design affect the Informativeness of Reviews? Theory, Evidence, and SuggestionsDate submitted: December 29, 2019Date accepted after double-blind review: December 2, 2020

“…The results of Huang et al's (2020) study show that employees' business outlooks collected from Glassdoor are well suited to predict the future operating performance of companies. The studies of Luo et al (2016), Moniz (2015) and Huang et al (2015) examine the relation between ERP contents and the financial performance of companies.…”

“…So far, there is a small but growing number of studies that use the information available on ERPs as a data source for different research questions. The majority of these studies (Marinescu et al, 2021;Huang et al, 2020;Dabirian et al, 2016;Luo et al, 2016;Moniz, 2015;Moniz & de Jong, 2014) rely on data from Glassdoor but other recently published studies (Hoon et al, 2019;Kollitz et al, 2019;Könsgen et al, 2018;Abel et al, 2017) also use Kununu as their data source.…”

Employee satisfaction and stock returns during the COVID-19 Pandemic

“…Information provided by company employees and disseminated over social media may be useful in understanding a corporation’s operating performance and returns ( Green et al, 2019 , Huang et al, 2020 , and Ylinen and Ranta, 2021 ). For example, Huang et al (2020) find a positive relationship between Glassdoor’s measure of employee confidence and the firm’s following two quarters’ ROA.…”