Two Essays on Labor in Corporate Finance

Chapter One examines the possibility of labor upgrading during the financial crisis of 2008-2009. We use granular information on the intended demand of foreign workers by publicly traded U.S. firms during 2005–2012 to examine firm-level labor decisions. The financial crisis has a negative impact on the labor demand in general, but we find that larger firms with lower leverage, higher market-to-book, and larger R&D-to-assets are more likely to upgrade their work force by requesting highly skilled foreign workers during the financial crisis. Furthermore, firms that upgrade their demand of foreign workers during the financial crisis are more productive in innovations, as proxied by more patents granted, during the post-crisis period. The evidence suggests that some firms indeed take advantage of the crisis to upgrade their labor force and such an upgrading has real economic benefits for those firms. Chapter Two examines how an exogenous shock affects analysts' forecasts. Utilizing the art market, this study leverages artist death as an exogenous setting to explore how it impacts the accuracy of analysts' pre-sale price estimates. In the year following an artist's death analysts' accuracy decreases by 14% on average. Subsample analysis indicates that the market attention and artists' reputation are the likely economic mechanisms influencing this decrease. These findings suggest that analysts perform poorly following information shocks which is pertinent for all capital market participants.