Author:
Israelsen Ryan D.,Yonker Scott E.
Abstract
Firms whose human capital is concentrated in a few irreplaceable employees lack diversification in their human capital stock, exposing them to key human capital risk. Using disclosures of “key man life insurance” to measure this risk, we show that exposed firms are riskier. These younger, smaller, growth firms have abnormally high volatility, and following announcement of key employee departures, the most exposed firms lose 8% of their value. Key employees tend to be highly educated. They are four times more likely to hold PhD degrees than top managers, and firms with key human capital are more innovative.
Publisher
Cambridge University Press (CUP)
Subject
Economics and Econometrics,Finance,Accounting
Cited by
46 articles.
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