Labor and Corporate Information Environment

Accounting research has long centered on executives and directors as drivers of the corporate information environment; recent work considers the rank-and-file employees who also drive it. We survey the growing literature at the intersection of corporate disclosure and labor economics, organizing our discussion around the dual role of workers as both producers and users of corporate information. We introduce a Labor Life Cycle (LLC) framework that follows the employee through four stages: Human Capital Development, Search and Matching, Employment and Productivity, and Turnover and Retirement. At each stage, we first outline the principal theories from labor economics where information frictions are central and identify the reporting and disclosure institutions those theories leave unmodeled. We continue with a discussion of the empirical findings from accounting research that speak to key information problems at each stage, and close by highlighting the open questions where accounting researchers are well positioned to further contribute. Three themes emerge from our review. First, as producers, rank-and-file labor shapes the corporate information environment. In particular, the abilities, incentives, and job stability of the workers who produce accounting information are first-order determinants of reporting and audit quality. Second, financial reporting shapes the labor market: as users, employees use corporate disclosures in their search, bargaining, and departure decisions. Third, the theory implies a feedback loop between disclosure and employment, yet direct empirical evidence on the loop is scant.