The Consequences of Working from Home: Evidence from Sell-Side Analysts

The COVID-19 pandemic has resulted in a massive shift in the number of employees working from home (WFH). Bick, Blandin, and Mertens (2020) document that the fraction of the workforce WFH increased from roughly 8% in February 2020 to more than 35% by May of 2020. Further, the shift towards WFH is unlikely to fully revert after the pandemic ends. A recent survey by PWC finds that more than 50% of workers are interested in working from home at least three days a week even after COVID-19 is no longer a concern (PWC, 2021).

While many workers are clearly enthusiastic about WFH, the value implications to corporations is unclear. Proponents of WFH argue that it can enhance firm value by increasing worker productivity (e.g., due to eliminating commuting and minimizing distractions) and/or allowing companies to attract and retain talented employees who value this flexibility. On the other hand, critics argue that WFH can encourage shirking, reduce focus, limit opportunities for valuable collaboration, and potentially attract lower-quality employees. Existing empirical evidence is also mixed.

However, there is also evidence that WFH can attract less productive workers (Emanuel and Harrington, 2020) and leads to declines in performance for more cognitively challenging tasks (Kunn, Seel, and Zegners, 2020). In this paper, we examine the consequences of WFH among sell-side analysts. Sell-side analysts provide an excellent laboratory for studying the consequences of WFH for several reasons.

Authors: Russell Jame and Marcus Painter