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The Effects of Human Resource Management Decisions on Shareholder Value

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  • John M. Abowd
  • George T. Milkovich
  • John M. Hannon

Abstract

Using an event study methodology, the authors investigate whether human resource decisions of firms (such as decisions concerning compensation and benefits or staffing) announced in the Wall Street Journal in 1980 and 1987 discernibly affected either the level or variation of abnormal total shareholder return. They find no consistent pattern of increased or decreased valuation in response to any of five categories of HR announcements, even after controlling for the likely effect of such announcements on total compensation costs. On the other hand, announcements of permanent staff reductions and shutdowns or relocations were associated with significant increases in the variation of abnormal total shareholder return around the announcement date, which indicates that HR decisions in those two categories do affect shareholders' predictions of firms' performance.

Suggested Citation

  • John M. Abowd & George T. Milkovich & John M. Hannon, 1990. "The Effects of Human Resource Management Decisions on Shareholder Value," ILR Review, Cornell University, ILR School, vol. 43(3), pages 203-2-236-, April.
    • Handle: RePEc:sae:ilrrev:v:43:y:1990:i:3:p:203-s-236-s
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    Cited by:

    1. Sentis, Patrick, 2001. "Sous-investissement et suppression d’effectifs : vers une réduction des coûts d’agence," L'Actualité Economique, Société Canadienne de Science Economique, vol. 77(1), pages 5-26, mars.
    2. Greer, Charles R. & Ireland, Timothy C. & Wingender, John R., 2001. "Contrarian human resource investments and financial performance after economic downturns," Journal of Business Research, Elsevier, vol. 52(3), pages 249-261, June.
    3. Henry S. Farber & Kevin F. Hallock, 1999. "Have Employment Reductions Become Good News for Shareholders? The Effect of Job Loss Announcements on Stock Prices, 1970-97," NBER Working Papers 7295, National Bureau of Economic Research, Inc.
    4. John M. Abowd, 1989. "Does Performance-Based Managerial Compensation Affect Subsequent Corporate Performance?," NBER Working Papers 3149, National Bureau of Economic Research, Inc.
    5. Jérôme Hubler & Pierre-Xavier Meschi & Géraldine Schmidt, 2004. "Annonces de suppressions d’emplois et valeur boursière de l’entreprise," Revue Finance Contrôle Stratégie, revues.org, vol. 7(4), pages 107-142, December.
    6. Pierre-Xavier Meschi & Emmanuel Metais, 2002. "Investissements français aux États-Unis, stratégies de croissance externe et réactions du marché boursier," Revue Finance Contrôle Stratégie, revues.org, vol. 5(1), pages 129-165, March.
    7. Bénédicte Reynaud & Arnaud Degorre, 2007. "Workforce reduction and firm performance: a comparison between French publicly-listed and non-listed companies, 1994-2000," Working Papers halshs-00588011, HAL.
    8. Camélia Dumitriu & Rachid Moustaquim, 2017. "Measuring Sustainable Development. Challenges and Solutions," International Conference on Marketing and Business Development Journal, The Bucharest University of Economic Studies, vol. 1(1), pages 131-141, July.
    9. Berninger, Marc & Gärtner, Henrik & Schiereck, Dirk, 2018. "Kapitalmarktreaktionen auf die Ankündigung von Personalabbauplänen – ein Überblick über drei Jahrzehnte empirische Evidenz," Die Unternehmung - Swiss Journal of Business Research and Practice, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 72(4), pages 289-325.
    10. Pinoli, Sara, 2007. "Employment Protection and Labor Productivity: Positive or Negative?," MPRA Paper 11775, University Library of Munich, Germany.
    11. Farber, Henry S. & Hallock, Kevin F., 2009. "The changing relationship between job loss announcements and stock prices: 1970-1999," Labour Economics, Elsevier, vol. 16(1), pages 1-11, January.
    12. Labadi, Moufida & Nekhili, Mehdi, 2012. "Structure de propriété et partage de la valeur ajoutée : application aux entreprises françaises non financières du SBF120," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 12.
    13. Bénédicte Reynaud, 2010. "Workforce reduction and firm performance: Evidence from French firm data," PSE Working Papers halshs-00564828, HAL.
    14. Peter Cappelli, 2000. "Examining the Incidence of Downsizing and Its Effect on Establishment Performance," NBER Working Papers 7742, National Bureau of Economic Research, Inc.
    15. Butler, Maureen G. & Callahan, Carolyn M., 2014. "Human resource outsourcing: Market and operating performance effects of administrative HR functions," Journal of Business Research, Elsevier, vol. 67(2), pages 218-224.
    16. Beat Reber & Bob Berry & Steve Toms, 2005. "Firm resources and quality signalling: evidence from UK initial public offerings," Applied Financial Economics, Taylor & Francis Journals, vol. 15(8), pages 575-586.
    17. Ian Worthington, 2009. "Corporate Perceptions of the Business Case for Supplier Diversity: How Socially Responsible Purchasing can ‘Pay’," Journal of Business Ethics, Springer, vol. 90(1), pages 47-60, November.
    18. Andrea Bassanini & Eve Caroli & Bruno Chaves Ferreira & Antoine Reberioux, 2020. "Don’t Downsize This! Social Reactions to Mass Dismissals on Twitter," Post-Print halshs-03012930, HAL.
    19. Meschi, Pierre-Xavier & Cheng, Louis T. W., 2002. "Stock price reactions to Sino-European joint ventures," Journal of World Business, Elsevier, vol. 37(2), pages 119-126, July.
    20. Patrick Sentis, 1998. "Performances à long terme et caractéristiques financières des entreprises qui réduisent leurs effectifs," Revue Finance Contrôle Stratégie, revues.org, vol. 1(4), pages 115-150, December.

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