Why do stock prices decline in response to employee layoffs? UK evidence from the 2008 global financial crisis

Research output: Contribution to conferencePaper

Abstract

Employee layoff decisions made during adverse economic conditions are expected to signal poor investment opportunities, but layoffs undertaken during prosperous markets should be efficiency enhancing. We examine layoffs during the global financial crisis of 2008 and compare this with an earlier period of economic prosperity. We find a positive market reaction to layoffs during rising financial markets but stock price declines following employee layoffs during the 2008 financial crisis. These price effects occur irrespective of the stated reason for the layoff and the industry of the announcing firm, and are mirrored in our robustness test of an earlier time period.

Conference

ConferenceEastern Finance Association Annual Meeting 2010
CountryUnited States
CityMiami
Period14/04/1017/04/10

Fingerprint

Global financial crisis
Stock prices
Layoffs
Employees
Prosperity
Investment opportunities
Financial crisis
Economics
Robustness test
Price effects
Economic conditions
Industry
Market reaction
Financial markets

Keywords

  • stock prices
  • employee layoffs
  • 2008 global financial crisis

Cite this

Marshall, A., McColgan, P., & Susan, M. (2010). Why do stock prices decline in response to employee layoffs? UK evidence from the 2008 global financial crisis. Paper presented at Eastern Finance Association Annual Meeting 2010, Miami, United States.
Marshall, Andrew ; McColgan, Patrick ; Susan, McLeish. / Why do stock prices decline in response to employee layoffs? UK evidence from the 2008 global financial crisis. Paper presented at Eastern Finance Association Annual Meeting 2010, Miami, United States.
@conference{b1952d7d6c8b41c68d9e639509883433,
title = "Why do stock prices decline in response to employee layoffs? UK evidence from the 2008 global financial crisis",
abstract = "Employee layoff decisions made during adverse economic conditions are expected to signal poor investment opportunities, but layoffs undertaken during prosperous markets should be efficiency enhancing. We examine layoffs during the global financial crisis of 2008 and compare this with an earlier period of economic prosperity. We find a positive market reaction to layoffs during rising financial markets but stock price declines following employee layoffs during the 2008 financial crisis. These price effects occur irrespective of the stated reason for the layoff and the industry of the announcing firm, and are mirrored in our robustness test of an earlier time period.",
keywords = "stock prices, employee layoffs, 2008 global financial crisis",
author = "Andrew Marshall and Patrick McColgan and McLeish Susan",
year = "2010",
language = "English",
note = "Eastern Finance Association Annual Meeting 2010 ; Conference date: 14-04-2010 Through 17-04-2010",

}

Marshall, A, McColgan, P & Susan, M 2010, 'Why do stock prices decline in response to employee layoffs? UK evidence from the 2008 global financial crisis' Paper presented at Eastern Finance Association Annual Meeting 2010, Miami, United States, 14/04/10 - 17/04/10, .

Why do stock prices decline in response to employee layoffs? UK evidence from the 2008 global financial crisis. / Marshall, Andrew; McColgan, Patrick; Susan, McLeish.

2010. Paper presented at Eastern Finance Association Annual Meeting 2010, Miami, United States.

Research output: Contribution to conferencePaper

TY - CONF

T1 - Why do stock prices decline in response to employee layoffs? UK evidence from the 2008 global financial crisis

AU - Marshall, Andrew

AU - McColgan, Patrick

AU - Susan, McLeish

PY - 2010

Y1 - 2010

N2 - Employee layoff decisions made during adverse economic conditions are expected to signal poor investment opportunities, but layoffs undertaken during prosperous markets should be efficiency enhancing. We examine layoffs during the global financial crisis of 2008 and compare this with an earlier period of economic prosperity. We find a positive market reaction to layoffs during rising financial markets but stock price declines following employee layoffs during the 2008 financial crisis. These price effects occur irrespective of the stated reason for the layoff and the industry of the announcing firm, and are mirrored in our robustness test of an earlier time period.

AB - Employee layoff decisions made during adverse economic conditions are expected to signal poor investment opportunities, but layoffs undertaken during prosperous markets should be efficiency enhancing. We examine layoffs during the global financial crisis of 2008 and compare this with an earlier period of economic prosperity. We find a positive market reaction to layoffs during rising financial markets but stock price declines following employee layoffs during the 2008 financial crisis. These price effects occur irrespective of the stated reason for the layoff and the industry of the announcing firm, and are mirrored in our robustness test of an earlier time period.

KW - stock prices

KW - employee layoffs

KW - 2008 global financial crisis

M3 - Paper

ER -

Marshall A, McColgan P, Susan M. Why do stock prices decline in response to employee layoffs? UK evidence from the 2008 global financial crisis. 2010. Paper presented at Eastern Finance Association Annual Meeting 2010, Miami, United States.