What do analysts and investors need to know about employment downsizing?

Wayne F. Cascio, Arjun Chatrath and Rohan A. Christie-David

Chapter 2 in A Concise Guide to Corporate Downsizing, 2025, pp 60-97 from Edward Elgar Publishing

Abstract: This chapter provides a comprehensive, multilevel look at employment downsizing and its relationship to the context and timing of that action. We begin with an overview of the relationship between employment downsizing and subsequent firm performance, followed by a brief history of employment downsizing. Then we examine the market's response to downsizing, emphasizing the performance consequences when employment downsizing occurs before declines in firm performance (proactive downsizing). We focus on what analysts and investors seek to understand about employment reductions, their context, and timing. To do that, we pose a series of questions, the answers to which are based on cross-sectional time series data for 4,627 U.S. corporations listed on the New York Stock Exchange between 1980 and 2017. Results provide theoretical and practical insights to guide analysts and investors, as well as future research questions for academics to explore.

Keywords: Employment downsizing, Firm performance, History, Timing of downsizing; Analysts; Investors (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035311002
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