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The Strathprints institutional repository is a digital archive of University of Strathclyde's Open Access research outputs. Strathprints provides access to thousands of Open Access research papers by University of Strathclyde researchers, including by researchers from the Department of Computer & Information Sciences involved in mathematically structured programming, similarity and metric search, computer security, software systems, combinatronics and digital health.

The Department also includes the iSchool Research Group, which performs leading research into socio-technical phenomena and topics such as information retrieval and information seeking behaviour.

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Why do stock prices decline in response to employee layoffs? U.K. evidence from the 2008 global financial crisis

Marshall, Andrew and McColgan, Patrick and McLeish, Susan (2012) Why do stock prices decline in response to employee layoffs? U.K. evidence from the 2008 global financial crisis. Journal of Financial Research, 35 (3). pp. 375-396. ISSN 0270-2592

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Abstract

Employee layoff decisions made during adverse economic conditions are expected to signal poor investment opportunities, but layoffs undertaken during rising financial markets should be efficiency enhancing. We examine layoffs during the global financial crisis of 2008 and compare this period to an earlier period of economic prosperity. We find a positive stock price response to layoffs during rising financial markets but stock price declines following employee layoffs during the 2008 financial crisis. These price effects occur irrespective of the stated reason for the layoff provided by management, the industry of the announcing firm, and are also mirrored in our robustness test of market peaks and troughs in earlier time periods.