Information of employee decisions and stock returns in the Korean stock market

We study the role of rank-and-file employees on asset prices in the Korean stock market using monthly labor flow data from the national pension subscription descriptions. We find that firms experiencing high net labor outflows have lower future risk-adjusted returns. This return predictability is found to originate mainly from gross labor outflows. We further show that the workers' labor market decisions better reflect information on the firms' fundamentals when firm sales are greater related to wages or when workers can more easily transfer to better jobs. Finally, we confirm the workers' ability to predict firm performance.