Layoff announcements and employment guarantee announcements: How do shareholders respond?

Abstract

The effect of layoff announcements on the shareholder returns of 154 firms that announced layoffs in 1993‐1994 was examined with event study methodology. As expected, the returns to these firms were negative. Further, the returns to the firms that announced layoffs for “reactive” reasons were more negative than the returns to the firms that announced layoffs for “proactive” reasons. The effect of employment guarantee announcements on the shareholder returns of 13 firms that announced employment guarantees in 1993‐1994 and on the returns of 63 firms that made similar announcements throughout the 1990 s was examined. Returns of these samples also responded negatively to the announcements. When the response to the two types of announcements was compared, however, there was no clear conclusion regarding which type of announcement drew a more negative response.

Citation

Abraham, S.E. (2004), "Layoff announcements and employment guarantee announcements: How do shareholders respond?", International Journal of Manpower, Vol. 25 No. 8, pp. 729-740. https://doi.org/10.1108/01437720410574852