Rival Growth Prospects and Equity Prices: Evidence from Mass Layoff Announcements
66 Pages Posted: 17 Sep 2018
Date Written: September 2018
We investigate the impact of mass layoff announcements on the equity value of industry rivals. When a layoff announcement conveys good (bad) news for the announcer, rivals on average witness a 0.44 percent increase (0.60 percent decrease) in cumulative abnormal stock returns. This effect is concentrated on rivals with high growth opportunities. Consistent with this finding, we also show that our results are strongest in technology industries, where growth opportunities matter the most. Our results suggest that investors perceive layoff announcements as news about industry prospects rather than just the announcer.
Keywords: mass layoffs, rivals, firm characteristics
JEL Classification: J63, G14
Suggested Citation: Suggested Citation