Line of Inquiry: Jessica S. Jeffers on how employees react to bad credit news

Mar 13, 2020

Sections Finance Video

Does it matter whether a company is financed through equity or debt? And if so, to whom does it matter? Prior research has found that skilled employees begin making career changes just before their employer declares bankruptcy, but do they react to credit signals earlier than that? Research coauthored by Chicago Booth’s Jessica S. Jeffers finds that a credit downwatch, or a warning that a formal downgrade of a company’s credit rating may be imminent, sparks increased networking activity among the company’s employees on the social network LinkedIn. The findings suggest this activity is more pronounced for skilled and senior employees, who may have a greater financial or career stake in the company’s wellbeing, and that more networking doesn’t necessarily presage a change of employers. Rather, many employees may ramp up their networking efforts as a hedge against further financial concerns.