Layoff and Employment Guarantee Announcements: How Do Shareholders Respond?

Steven E. Abraham (abraham@oswego.edu) and Dong-One Kim
Additional contact information
Steven E. Abraham: School of Business, SUNY-Oswego
Dong-One Kim: college of Business Administration, Korea University

Departmental Working Papers from Department of Economics, SUNY-Oswego

Abstract: Event study methodology was used to assess the effects of both layoff and employment guarantee announcements on shareholder returns. The Wall Street Journal was used to identify 368 firms that announced layoffs and 13 firms that announced employment guarantees in 1993 or 1994. The results were used to test the validity of four hypotheses: labor-cost, efficiency, industrial-relation-effect, and signalling-effect hypotheses. The results show that both layoff announcements and employment guarantee announcements induced a decrease in the shareholder returns of the firms that made the announcements. Each of the above four models received partial support.

Keywords: layoffs; downsizing; event study; employment guarantee (search for similar items in EconPapers)
JEL-codes: J6 M10 M12 (search for similar items in EconPapers)
Pages: 25 pages
Date: 1999-04-20, Revised 1999-04-20
New Economics Papers: this item is included in nep-fin, nep-lab and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:nyo:oswaaa:199902

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