FAIRR Seminar - Michael Ewens (Columbia) )

Place : Grand Paris Campus
Time : 10:30am-12:00pm
Speaker : Michael Ewens (Columbia) 

Abstract : We introduce a novel measure of corporate hierarchies for over 2,800 U.S. public firms.
This measure is obtained from online resumes of 16 million employees and a network
estimation technique that allows us to identify hierarchical layers. Equipped with this
measure, we document several facts about corporate hierarchies. Firms have on average
ten hierarchical layers and a pyramidal organizational structure. More hierarchical firms
have a more educated workforce, higher internal promotion rates, and longer employee
tenure. Their operating performance is higher, but they face higher administrative costs.
They are more active acquirers and produce more patents, but not higher-quality patents.
They exhibit lower stock return volatility and more stable cash flows. We also examine how
companies adjust their hierarchies in response to demand and knowledge shocks. We find
that biotech companies increased their number of layers following the Covid-19 pandemic,
while companies flatten their hierarchies following the adoption of artificial intelligence
(AI) technologies. These findings are consistent with the theoretical predictions of existing
models of corporate hierarchies.