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Layoff and Employment Guarantee Announcements: How Do Shareholders Respond?

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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.

Suggested Citation

  • Steven E. Abraham & Dong-One Kim, 1999. "Layoff and Employment Guarantee Announcements: How Do Shareholders Respond?," Departmental Working Papers 199902, Department of Economics, SUNY-Oswego, revised 20 Apr 1999.
  • Handle: RePEc:nyo:oswaaa:199902
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    File URL: http://economic.oswego.edu/papers/199902.pdf
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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.

    More about this item

    Keywords

    layoffs; downsizing; event study; employment guarantee;

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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