Is Hiring Fast a Good Sign? The Informativeness of Job Vacancy Duration for Future Firm Profitability

Abstract

Job vacancy duration reflects the time a firm invests in searching, selecting, and hiring for a job opening. Capturing vacancy duration using job posting creation and deletion dates in U.S. public firms, we examine its relationship with future firm profitability. We find that, while firms who quickly fill low-skill job vacancies exhibit higher future profitability, firms who invest more time in filling high-skill jobs exhibit higher future profitability. Our cross-sectional analyses across labor market tightness and firm expansion provide evidence supporting the proposition that firms with higher expected profitability recruit more intensively to avoid the opportunity cost associated with vacancies for low-skill jobs and to ensure the selection of high-quality workers for high-skill jobs. Further analyses show that the implication of job vacancy duration for future profitability is not incorporated timely in the capital markets, as evidenced by pessimistic analyst forecasts and positive earnings announcement returns in the future quarters for firms with short (long) durations for low-skill (high-skill) jobs. These results demonstrate the informativeness of job vacancy duration for firm profitability and advance our understanding of firms’ recruiting and hiring practices.