Employee Turnover and Firm Performance: Large-Sample Archival Evidence

Employee turnover is a significant cost for businesses and a key human capital metric, but firms do not disclose this measure. We examine the information content of turnover using a large panel of turnover data extracted from employees’ online profiles. We find that turnover is negatively associated with future financial performance. The negative association between turnover and future performance is stronger for small firms, for young firms, for firms with low labor intensity, and when the local labor market tightens. This association is negative only when turnover is not very low, suggesting that a certain amount of turnover is not detrimental. Finally, we find a significant association between turnover and future earnings announcement returns, suggesting that investors do not fully incorporate turnover information. Our findings have implications for managers and investors, and we answer the call from the SEC to determine the importance of turnover disclosure.