Essays on labor and accounting

Abstract

This dissertation consists of two essays on labor and accounting research. The first essay studies firms’ accounting human capital investment (i.e., hiring accounting professionals) when forming strategic alliance relationships. Information frictions are prevalent in such relationships, leading to hold-up problems. As higher-quality accounting information provides credible signals that help alliance partners evaluate firms’ alliance activities, and accounting human capital investment helps improve firms’ accounting information systems and information quality, I hypothesize and find that firms increase such investments when they have alliance relationships. This effect is more pronounced when firms’ perceived financial reporting quality is lower and when firms enjoy greater benefits associated with higher financial reporting quality. Further analyses reveal that firms that invest more in accounting human capital have improved financial reporting quality; alliance partner firms generate higher long-term returns by allying with firms that invest in accounting human capital. Overall, I provide novel evidence that firms increase accounting human capital investment when having alliance relationships, and such investments improve the quality of information flow among the partners that benefits all parties involved. The second essay investigates the relationship between within-firm information inequality and employee wage inequality. We use the distance between establishments and headquarters to proxy for the level of within-firm employee information disadvantage. Employee salary data from Glassdoor are used to establish that, ceteris paribus, greater distances between establishments and headquarters lead to lower employee wages. This is especially evident in private firms, firms with limited transparency, large earnings volatility, and more establishments. The pattern remains consistent by only using non-headquarter establishments. We use new airline route introductions as a natural experiment and find that reducing travel time to headquarters increases employee wages. Furthermore, we demonstrate that employees working farther from the headquarters exhibit less accurate predictions of employer performance, offering direct evidence of within-firm information inequality. In summary, our research illuminates a significant contributor to income inequality and proposes potential strategies to alleviate these disparities.