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Despite the inherent value of human capital, publicly traded companies are not required to make many disclosures about it. Most investors are largely unaware of a key indicator of a firm’s future growth potential: online job postings. Information about postings is hard to gather, making it accessible only to a select few. If postings data were readily available, more investors could gain new insights into growth trends.  

In their paper, Are Online Job Postings Informative to Investors?, forthcoming in Management Science, Terry Shevlin and Ben Lourie, both professors at The UCI Paul Merage School of Business, together with Elizabeth Gutierrez of Universidad de Chile and Alexander Nekrasov of University of Illinois at Chicago, propose that investors could use a company’s daily online job postings to predict future growth. Typically, job disclosures only cover key executives and annual head counts. “There’s no information about human capital in financial statements,” says Lourie, “even though it’s a very important asset for the firm.”

The lack of human capital reporting creates a blind spot for the average investor. “Since employees are very important to the value creation of the firm, we were curious about what sorts of information could be found to help us determine the valuation of the firm more accurately,” says Lourie.

Sorting the wheat from the chaff

To aid their data collection, Shevlin and Lourie used job postings data from LinkUp, which has collected job posting data for the past decade. “With this data, we can see how many job postings are available every day, which tells you if the company is hiring more or less every day,” says Lourie. 

To dig deeper, they needed to distinguish postings for replacement employees from those tied to growth-related positions. As Shevlin explains, “If a job listing is for replacement, then the signal is different than for new jobs or growth-related hiring. So, if we compare those hiring numbers to the past year’s sales growth this is an indication that those job postings are growth-related. Also, if we compare the number of employees year-over-year we can see if the firm is adding new headcount or basically staying the same.”

A tool for institutional investors . . .

The team was expecting to see a correlation between a firm’s daily job postings and changes in stock price. They were surprised by how strong the correlation turned out to be. This revelation confirmed that the human capital data was already a valuable resource for many investors. “It is highly likely that some group has informed certain investors about this type of information outside of what they normally have access to,” says Shevlin.

Historical data support this conclusion. It is unlikely that online job postings were available to investors

to investors until around 2013. Looking at the period before data became more available, the team found less market reaction around daily job postings, and delayed reaction to firm growth. After 2013, the correlation between daily job postings and market movement became stronger.

In the midst of a global pandemic, business media outlets are drawing upon job postings data to evaluate the pandemic’s impact on individual firms and entire industries. “For example, a lot of companies that have recently gone bankrupt showed a reduction in online job postings just before filing bankruptcy. We can see right now that many retail companies are hurting, but large tech companies are doing very well, and their job postings are on the rise,” Lourie says. He adds that unlike other types of information, job posting data are immediately available.

. . . and for ordinary investors, too?

Absent disclosure requirements, an individual investor is unlikely to have access to postings data, giving institutional investors a big advantage. Individual investors lack the resources of institutions, which can afford to gather the information themselves or pay a third-party provider. The result is an obvious disadvantage for average investors.

Shevlin thinks the SEC may be moving toward a shift in policy. “Our research shows that online job postings are a strong leading indicator that investors can use to determine future performance. The SEC wants a level playing field for every investor. So, eventually this data might soon become a required disclosure to eliminate the disadvantage currently experienced by the average retail investor who doesn’t have easy access to this level of detail.”

Shevlin and Lourie hope their work contributes to the ongoing conversation about public company transparency and investor information. As more investors become aware of how important this data can be, the tide may turn in favor of rules to make job postings data more readily available for everyone, everywhere.

Terry Shevlin is a professor of accounting, Paul Merage chair in business growth and associate dean of research and doctoral programs at The UCI Paul Merage School of Business. He earned his PhD from Stanford University in 1986 and joined the faculty at the University of Washington where he worked for 26 years until joining UCI in 2012. He has served as editor on three academic journals and on numerous editorial boards. He has published over 45 articles in the very top accounting and finance journals. His research interests are broad and include the effect of taxes on business decisions and asset prices, capital markets-based accounting research, earnings management, employee stock options, research design and statistical significance testing issues.

Ben Lourie is an assistant professor of accounting at The UCI Paul Merage School of Business. His research interests are broad and include financial reporting and disclosure, capital markets, financial analysts, and human capital. His work examines, among other issues, equity analysts’ conflicts of interest, psychological biases, and the informativeness of human capital measures. Lourie has published in top-tier journals such as The Accounting Review, Journal of Financial Economics, Management Science, Review of Accounting Studies, and Review of Finance. His research has been covered by the Wall Street Journal, Financial Times, Business Insider, Bloomberg and International Business Times. He has taught at the master and PhD levels. He currently teaches financial statement analysis and SAS and STATA boot camp. Lourie earned his PhD from the UCLA Anderson School of Business and his bachelor’s degree in economics from Tel Aviv University. He worked as a senior consultant in Deloitte Management Consulting.

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