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Layoff and Employment Guarantee Announcements: How Do Shareholders Respond?

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Author Info

  • Steven E. Abraham

    ()
    (School of Business, SUNY-Oswego)

  • Dong-One Kim

    (college of Business Administration, Korea University)

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    Abstract

    Event study methodology was used to assess the effects of both layoff and employment guarantee announcements on shareholder returns. The Wall Street Journal was used to identify 368 firms that announced layoffs and 13 firms that announced employment guarantees in 1993 or 1994. The results were used to test the validity of four hypotheses: labor-cost, efficiency, industrial-relation-effect, and signalling-effect hypotheses. The results show that both layoff announcements and employment guarantee announcements induced a decrease in the shareholder returns of the firms that made the announcements. Each of the above four models received partial support.

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    File URL: http://economic.oswego.edu/papers/199902.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, SUNY-Oswego in its series Departmental Working Papers with number 199902.

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    Length: 25 pages
    Date of creation: 20 Apr 1999
    Date of revision: 20 Apr 1999
    Handle: RePEc:nyo:oswaaa:199902

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    Postal: Department of Economics, SUNY-Oswego, Oswego, NY 13126, U.S.
    Phone: 315-312-2175
    Fax: 315-312-5444
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    Web page: http://www.oswego.edu/~economic/
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    Related research

    Keywords: layoffs; downsizing; event study; employment guarantee;

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    References

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    1. Chatrath, Arjun & Ramchander, Sanjay & Song, Frank, 1995. "Are market perceptions of corporate layoffs changing?," Economics Letters, Elsevier, vol. 47(3-4), pages 335-342, March.
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    Cited by:
    1. 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.

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