Human Capital Reallocation across Firms: Evidence from Idiosyncratic Shocks

Erik P Gilje, Jérôme P Taillard and Linghang Zeng

The Review of Corporate Finance Studies, 2025, vol. 14, issue 3, 717-751

Abstract: We study human capital reallocation following firm-specific idiosyncratic shocks. We analyze relegation battles in the English Premier League, a setting that offers well-identified idiosyncratic shocks as well as both individual-level and firm-level productivity metrics. Following a negative idiosyncratic shock, we find that relatively more productive players move to more productive clubs and maintain their long-term productivity. They get replaced with lower productivity players. Overall, our results show that in a setting with highly transferable and observable skills, idiosyncratic shocks lead to a reallocation of human capital that moves the industry toward a better overall match between individual-level and firm-level productivity. (JEL G31, G32, G33, J24)

Date: 2025
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