Risk from the Inside Out: Understanding Firm Risk through Employee News Consumption

Fahiz Baba Yara; Carter Davis; Fotis Grigoris; Preetesh Kantak

doi:10.2139/ssrn.4354256

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Risk from the Inside Out: Understanding Firm Risk through Employee News Consumption

Working paper

Open access

Risk from the Inside Out: Understanding Firm Risk through Employee News Consumption

Fahiz Baba Yara, Carter Davis, Fotis Grigoris and Preetesh Kantak

Kelley School of Business Research Paper, Vol.2023-4354256

SSRN

02/14/2023

DOI: 10.2139/ssrn.4354256

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Abstract

We use employee news consumption to characterize firms’ exposures to macroeconomic risk, making use of data covering two billion employee-article interactions per day across millions of firms. We find that, in the time-series, employees consume more macroeconomic news following the onset of bad times. In the cross-section, firms whose employees were reading more macroeconomic news ex-ante are more exposed to changing economic conditions ex-post. Consistent with the notion that employee news consumption provides insights into firms’ risk exposures, we show that the more exposed firms hedge more, yet have higher costs of capital and subsequently lower investment and hiring rates.

Economic Uncertainty

Employment

Equity Premium

Hedging

Investment

Risk

Details

Title: Subtitle: Risk from the Inside Out: Understanding Firm Risk through Employee News Consumption
Creators: Fahiz Baba Yara
Carter Davis
Fotis Grigoris
Preetesh Kantak
Resource Type: Working paper
Publication Details: Kelley School of Business Research Paper, Vol.2023-4354256
DOI: 10.2139/ssrn.4354256
Publisher: SSRN
Number of pages: 81 pages
Alternative title: Are Uncertain Firms Riskier?
Language: English
Date posted: 02/14/2023
Date updated: 01/16/2024
Academic Unit: Finance
Record Identifier: 9984580316602771

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