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Reactions of the International Stock Exchange to Company Employment Announcements: Redundancies and New Jobs

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  • Nick Collett

Abstract

This paper is the first to look directly at the reaction of the London market to company announcements of changes to employee count. Using event study methodology, we examine market reactions to 54 redundancy announcements during the period 1990–1999 and 52 announcements of new jobs during the period 1993–1999. In line with previous US studies we find that market reaction, measured by cumulative abnormal returns, is negative before the day of redundancy announcement. The actual redundancy announcement is greeted positively by the market when measured in terms of the mean, but negatively when measured in terms of the median. Thus, in a minority of cases the announcements are seen as value enhancing. The market reacts positively before new job announcements and this positive reaction is highly significant when the announcement is made. The results suggest that new job announcements contain value–relevant information for the market. Potential causal factors other than announcement size are not significant.

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  • Nick Collett, 2002. "Reactions of the International Stock Exchange to Company Employment Announcements: Redundancies and New Jobs," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(9‐10), pages 1181-1208.
    • Handle: RePEc:bla:jbfnac:v:29:y:2002:i:9-10:p:1181-1208
    DOI: 10.1111/1468-5957.00466
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    Cited by:

    1. Nick Collett, 2004. "Reactions of the London Stock Exchange to Company Trading Statement Announcements," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(1‐2), pages 3-35, January.
    2. Syed Zulfiqar Ali Shah, 2007. "Discussion of Employee Layoffs, Shareholder Wealth and Firm Performance: Evidence from the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(3‐4), pages 495-504, April.
    3. 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.
    4. David Hillier & Andrew Marshall & Patrick McColgan & Samwel Werema, 2007. "Employee Layoffs, Shareholder Wealth and Firm Performance: Evidence from the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(3‐4), pages 467-494, April.
    5. Nick Collett, 2004. "Reactions of the London Stock Exchange to Company Trading Statement Announcements," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(1-2), pages 3-35.

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