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Market reactions to layoff announcements during crises: Examining impacts and conditioners

Author

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  • Kumar, Rahul
  • Pandey, Dharen Kumar
  • Goodell, John W.

Abstract

There is limited research on the effect of layoff announcements on stock returns during difficult economic conditions. We use event study and cross-sectional analysis to examine the impacts of layoff announcements on stock market returns during recent crises. Findings reveal that layoff announcements significantly negatively impact firm stock returns in both the short and medium terms, with firm leverage, price-to-book ratio, liquidity, return on assets, volatility, and past returns being significant conditioners. Results highlight the reaction of markets to layoff announcements and the importance of considering firm and market characteristics in forecasting the impact of layoff announcements on stock performance.

Suggested Citation

  • Kumar, Rahul & Pandey, Dharen Kumar & Goodell, John W., 2023. "Market reactions to layoff announcements during crises: Examining impacts and conditioners," Finance Research Letters, Elsevier, vol. 58(PB).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pb:s154461232300795x
    DOI: 10.1016/j.frl.2023.104423
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