Downsizing Announcements, Job Security Perceptions, and Worksite Performance

Guido Friebel, Matthias Heinz, Ingo Weller and Nick Zubanov

A chapter in Workplace Productivity and Management Practices, 2021, vol. 49, pp 179-205 from Emerald Group Publishing Limited

Abstract: Using data from a retail chain of 193 bakery shops that underwent downsizing, we study the effects of two types of downsizing announcements – closure or sale to another operator – on sales in the affected shops, and how these effects are moderated by job security perceptions. On average, sales in the affected shops go down by 26% after a closure announcement and by 7% after a sale announcement. Sales decline more sharply in shops where employees had higher job security perceptions before the announcement. Our findings are consistent with psychological contract theory: a breach of an implicit contract promising job security in exchange for work effort results in a reciprocal effort withdrawal. We rule out several alternative explanations to our findings.

Keywords: Downsizing announcements; performance; job security; relational psychological contract; insider econometrics; retail; J53; M54; L25 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rleczz:s0147-912120210000049007

DOI: 10.1108/S0147-912120210000049007

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