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Employee layoffs, shareholder wealth and firm performance: evidence from the UK

McColgan, P. and Hillier, C. and Marshall, A.P. and Wereman, S. (2007) Employee layoffs, shareholder wealth and firm performance: evidence from the UK. Journal of Business Finance and Accounting, 34 (3-4). pp. 467-494. ISSN 0306-686X

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Abstract

We examine the financial performance of UK listed companies surrounding the announcement of permanent employee layoffs. We find that poor operating and stock price performance, increased gearing, and threats from external markets for corporate control precede employee layoffs. Layoff announcements elicit a significantly negative stock price reaction, which is driven by announcements that are reactive to poor financial conditions. We also find that layoffs result in significant increases in employee productivity and corporate focus. We conclude that layoffs represent an efficient response to poor financial conditions, but that their occurrence is strongly dependent on pressure from external control markets.

Item type: Article
ID code: 5586
Keywords: corporate control, corporate restructuring, employee layoffs firm performance, Commerce, Finance, Business, Management and Accounting (miscellaneous), Accounting
Subjects: Social Sciences > Commerce
Department: Strathclyde Business School > Accounting and Finance
Related URLs:
    Depositing user: Strathprints Administrator
    Date Deposited: 14 Mar 2008
    Last modified: 04 Sep 2014 17:46
    URI: http://strathprints.strath.ac.uk/id/eprint/5586

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