Rival Growth Prospects and Equity Prices: Evidence from Mass Layoff Announcements

Adam Bordeman, Bharadwaj Kannan and Roberto Pinheiro

Journal of Money, Credit and Banking, 2021, vol. 53, issue 8, 1969-1997

Abstract: We investigate the impact of mass layoff announcements on industry rivals and find that investors perceive layoff announcements as news about industry prospects. When a layoff announcement conveys good (bad) news for the announcer, rivals on average witness a 0.51% increase (0.65% decrease) in cumulative abnormal stock returns. To explain this industry effect, we test a “growth opportunities” channel, where rivals with greater growth opportunities are affected most by changing industry prospects, and find that these firms experience the strongest contagion effect. Alternative industry classifications and a placebo test confirm that our results are not driven by confounding factors.

Date: 2021
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https://doi.org/10.1111/jmcb.12816

Related works:
Working Paper: Rival Growth Prospects and Equity Prices: Evidence from Mass Layoff Announcements (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:53:y:2021:i:8:p:1969-1997

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