Managing Employee Retention Concerns: Evidence from US Census Data. Labro, E. and J. Omartian (latest version: April 2022)

Using Census microdata on 14,000 manufacturing plants, we examine how firms man- age employee retention concerns in response to local wage pressure. We validate our measure of employee retention concerns by documenting that plants respond with wage increases, and do so more when the employees’ human capital is higher. We document substantial use of non-wage levers in response to retention concerns. Plants shift incentives to increase the likelihood that bonuses can be paid: performance target transparency declines, as does the use of localized performance metrics for bonuses. Furthermore, promotions become more meritocratic, ensuring key employees can be promoted and retained. Lastly, decision-making authority at the plant-level increases, offering more agency to local employees. We find evidence consistent with inequity aversion constraining the response to local wage pressure, and document spillovers in both wage and non-wage reactions across same-firm plants.

In-Network Auditors as Information Intermediaries Within Business Groups . Labro, E. , C. David, J. Pierk and C. Van Linden (latest version: April 2022

We investigate if and how in-network auditors (where parent and subsidiary are audited by auditors from the same audit firm network) serve as information intermediaries within business groups. Using a sample of European groups, we show that in-network auditors, in contrast to involving out-of-network auditors, increase the speed at which information is compiled and enhance the comparability of information within groups. We confirm these results through interviews which provide examples of how in-network auditors can improve information flows within groups. As a result, groups and subsidiaries benefit from increased responsiveness to investment opportunities. While prior literature mostly focuses on the role of the auditor in providing assurance to financial reporting, our paper shows that in-network auditors provide increased added value to their audit clients through improved information intermediation within business groups.

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