FSRDC Presentation Series 2024: The Labor Market Impact of Shareholder Power: Worker-Level Evidence
“The Labor Market Impact of Shareholder Power: Worker-Level Evidence”
Presented by Hyunseob Kim
November 13th @ 3:00 pm ET
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Abstract: Using worker-level data from the US Census Bureau’s LEHD program from 1993 through 2015, we show that shareholder power leads to large earnings losses for employees. We track the earnings of employees up to five years after their firms experience a material increase in concentrated ownership by institutional shareholders, relative to employees of other firms that experience a similarly sized increase in ownership by diffused institutional shareholders. We find that over the next six years, the cumulative earnings of the affected employees decline by 10% of their pre-event annual earnings on average. Workers with earnings in the top tercile and top managers (such as chief executives) bear the brunt of the earnings losses, with their cumulative earnings declining by 16% and 43%, respectively. In contrast, the increased shareholder power does not affect the earnings of employees with relatively low pay. The earnings losses do not differ conditional on firm departure, suggesting that separation from job is not a main channel for the effects. The collection of evidence appears consistent with concentrated ownership increasing shareholder bargaining power, which in turn reduces employee rents.
Hyunseob Kim is a senior economist in the economic research department of the Federal Reserve Bank of Chicago. Kim joined the Chicago Fed in 2021, following nine years with the Johnson Graduate School of Management at Cornell University, where he was an assistant professor of finance. His research interests lie at the intersection of finance and labor.
hyunseob.kim@chi.frb.org
Hyunseob’s website.
FSRDC Presentation Series 2024
*The FSRDC Presentation Series offers a virtual platform for researchers who have conducted research in an FSRDC using Census Bureau data to share their work. Though the Census Bureau received a programmatic benefit from this work, the researcher(s) were neither employed nor funded by the U.S. Census Bureau. The Census Bureau and its partner agencies have reviewed the statistical output contained in these publications and presentations to ensure against any unauthorized disclosure of confidential information. However, all findings and interpretations of these research results are made exclusively by the researcher and do not represent the views or positions of the U.S. Census Bureau or our partner agencies or institutions.