Trading on Talent: Human Capital and Firm Performance


How does a firm's human capital impact financial performance? By directly observing the employment and education trajectories of a significant proportion of U.S. public company employees from 1990 to the present, we explore the relationship between performance and two aspects of human capital: turnover and skills. First, we find that firms with higher employee turnover experience significantly worse future returns. A long-short strategy based on employee turnover with a three-month lag lag generates an excess compounded annual return of 14.3%. Second, firms with a larger emphasis on sales-oriented skills show better subsequent performance, whereas firms with more focus on administrative skills underperform. The effects of skills are heterogeneous across industries, with a larger premium on web development in Information, a higher premium on insurance in Manufacturing, and no benefit from sales-oriented skills in Finance.


Best Paper on Long-Term Investments, 2018 Northern Finance Association
Winner, 2017 Jack Treynor Prize from the Institute for Quantitative Research in Finance
Second Place, 2017 PanAgora Asset Management Dr. Richard A. Crowell Memorial Prize

Last updated on 10/10/2018