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Changing Stock Market Response to Announcement of Job Loss: Evidence from 1970-1997

Author

Listed:
  • Henry S. Farber

    (Princeton University)

  • Kevin F. Hallock

    (University of Illinois)

Abstract

We report preliminary results of an analysis of the reaction of stock prices to announcements of reductions in force (RIFs) using a large sample of such announcements during the 1970-1997 period collected from the Wall Street Journal index. We find some evidence that the stock market reaction to the announcement of RIFs has become less negative over this period. While a complete understanding of the underlying causes of this finding awaits further research, one possible interpretation is that, over the last three decades, RIF s designed to improve deficiency have become more common relative to RIFs designed to cope with reductions in product demand.

Suggested Citation

  • Henry S. Farber & Kevin F. Hallock, 1999. "Changing Stock Market Response to Announcement of Job Loss: Evidence from 1970-1997," Working Papers 793, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:414
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    References listed on IDEAS

    as
    1. Henry S. Farber, 1997. "The Changing Face of Job Loss in the United States, 1981-1995," Working Papers 761, Princeton University, Department of Economics, Industrial Relations Section..
    2. Blackwell, David W. & Marr, M. Wayne & Spivey, Michael F., 1990. "Plant-closing decisions and the market value of the firm," Journal of Financial Economics, Elsevier, vol. 26(2), pages 277-288, August.
    3. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    4. Richard E. Caves & Matthew B. Krepps, 1993. "Fat: The Displacement of Nonproduction Workers from U.S. Manufacturing Industries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2 Microec), pages 227-288.
    5. Henry S. Farber, 1997. "The Changing Face of Job Loss in the United States, 1981-1995," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 55-142.
    6. Henry S. Farber, 1997. "The Changing Face of Job Loss in the United States, 1981-1995," Working Papers 761, Princeton University, Department of Economics, Industrial Relations Section..
    7. Hallock, Kevin F, 1998. "Layoffs, Top Executive Pay, and Firm Performance," American Economic Review, American Economic Association, vol. 88(4), pages 711-723, September.
    8. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Norbert Funke & Akimi Matsuda, 2006. "Macroeconomic News and Stock Returns in the United States and Germany," German Economic Review, Verein für Socialpolitik, vol. 7, pages 189-210, May.
    2. Thomas Kochan, 2003. "Restoring Trust in American Corporations: Addressing the Root Cause," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 7(3), pages 223-231, September.

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    More about this item

    Keywords

    job loss; layoffs; downsizing;
    All these keywords.

    JEL classification:

    • N66 - Economic History - - Manufacturing and Construction - - - Latin America; Caribbean

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