Seminar (Dept. of Accounting)

Title：Human Capital and Retention in the Audit Profession: Evidence from the Great Resignation

Speaker: Rebecca Hann, Professor, University of Maryland

Time：10:30-12:00, March 17th, 2025 (Monday)

Venue：Room 1008, Mingde Business Building

Language：English

ABSTRACT:

This study examines how audit firms retain talent during labor market disruptions around the Great Resignation (GR) and the effectiveness of their retention strategies. Using granular LinkedIn employment profile data, we first document a significant increase in turnover of junior auditors around the GR, confirming that the voluntary exits observed in other sectors also occurred in the audit industry. Consistent with audit firms responding to these disruptions, we find that audit firms significantly increased early promotions for second-year junior auditors during the GR (GR cohort) compared to previous cohorts. We further find that the GR cohort’s third-year turnover rate is significantly lower than that of earlier cohorts. Surprisingly, these effects are more pronounced for audit offices in more concentrated audit labor markets. When examining specific retention mechanisms, we find that early promotions might be ineffective tools; junior auditors promoted early are more likely to leave in their third year, suggesting that such measures may signal higher quality and hence unintentionally strengthen external mobility. Taken together, our findings suggest that the GR prompted audit firms to rethink their retention strategies, providing new insights into talent retention in the audit profession, which is critical for ensuring high-quality audits.

SHORT BIOGRAPHY:

Rebecca Hann is the Dean’s Professor of Accounting at the Robert H. Smith School of Business at the University of Maryland and currently serves as the Associate Dean of Research and Doctoral Programs. Her research examines how information transparency affects decision-making and resource allocation in capital and labor markets, with a specific focus on how information frictions can lead to inefficiencies at both the firm and macroeconomic levels. Her recent work examines the role of human capital in the accounting labor market, particularly examining how advancements in technology affect skill development and talent acquisition. Her research has been published in leading accounting and finance journals, including The Accounting Review, Contemporary Accounting Research, Journal of Accounting and Economics, Journal of Accounting Research, Journal of Finance, Management Science, and Review of Accounting Studies. She serves on the editorial board of The Accounting Review.