Employee layoffs, shareholder wealth and firm performance: evidence from the UK

Research output: Contribution to journalArticle

31 Citations (Scopus)

Abstract

We examine the financial performance of UK listed companies surrounding the announcement of permanent employee layoffs. We find that poor operating and stock price performance, increased gearing, and threats from external markets for corporate control precede employee layoffs. Layoff announcements elicit a significantly negative stock price reaction, which is driven by announcements that are reactive to poor financial conditions. We also find that layoffs result in significant increases in employee productivity and corporate focus. We conclude that layoffs represent an efficient response to poor financial conditions, but that their occurrence is strongly dependent on pressure from external control markets.
LanguageEnglish
Pages467-494
Number of pages27
JournalJournal of Business Finance and Accounting
Volume34
Issue number3-4
DOIs
Publication statusPublished - 2007

Fingerprint

Shareholder wealth
Layoffs
Employees
Firm performance
Announcement
Financial condition
Financial performance
Listed companies
Employee productivity
Stock price performance
Threat
Market for corporate control
Stock price reaction

Keywords

  • corporate control
  • corporate restructuring
  • employee layoffs firm performance

Cite this

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Employee layoffs, shareholder wealth and firm performance: evidence from the UK. / McColgan, P.; Hillier, C.; Marshall, A.P.; Wereman, S.

In: Journal of Business Finance and Accounting, Vol. 34, No. 3-4, 2007, p. 467-494.

Research output: Contribution to journalArticle

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