The impact of corporate social responsibility on employee layoffs, severance payments, and voluntary layoff disclosure

Daniela Sanchez (), Gary Fleischman () and Juan Manuel Sanchez ()
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Daniela Sanchez: The University of Texas at San Antonio
Gary Fleischman: Texas Tech University
Juan Manuel Sanchez: The University of Texas at San Antonio

Review of Quantitative Finance and Accounting, 2025, vol. 65, issue 3, No 1, 885-928

Abstract: Abstract We compare the following layoff-related outcomes between firms with high corporate social responsibility scores (HCSR) versus firms with low CSR scores (LCSR): the likelihood and magnitude of decisions to lay off employees, the amount of severance compensation paid to terminated employees, and the degree of voluntary disclosure about layoff details. We find that HCSR firms are more likely to lay off employees and such layoffs are of higher magnitude compared to LCSR firms. However, compared with LCSR firms, HCSR firms provide greater severance benefits and more transparent disclosures about layoffs, suggesting HCSR firms maintain their socially responsible status and manage the pain of downsizing through enhanced severance payments and more detailed voluntary disclosures. Finally, we test the salience of our main findings using an alternate channel of CSR, namely, membership in the 100 Best Companies to Work For in America list. This analysis confirms the notion that the social capital and reputation enjoyed by these firms mitigates the political costs typically ascribed to layoffs.

Keywords: Corporate social responsibility (CSR); Layoffs; Downsizing; Restructuring costs (search for similar items in EconPapers)
JEL-codes: G3 M4 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11156-024-01363-4

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