The Market Loves a Layoff

66 Pages Posted: 29 Oct 2020

See all articles by Chris Mace

Chris Mace

UT Dallas, Naveen Jindal School of Management

Date Written: October 16, 2020


This paper examines whether layoffs damage or create firm value. Using a large sample of firm-matched layoff events, I show that layoffs increase firm value with abnormal returns increasing in the days and months following layoff announcements. Using a synthetic controls methodology, I also show that layoffs also continue to result in higher returns in the years following the layoff event. Using changes in minimum wage laws as a natural experiment, I show that layoffs often target low-skill workers, suggesting that layoffs do not necessarily destroy knowledge capital.

Keywords: Layoffs, Firm Value, Knowledge Capital, Event Study, Synthetic Controls

JEL Classification: D22, G31, G32, J24, J63, L25, M51

Suggested Citation

Mace, Chris, The Market Loves a Layoff (October 16, 2020). Available at SSRN: or

Chris Mace (Contact Author)

UT Dallas, Naveen Jindal School of Management ( email )

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ATTN: Christopher Mace JSOM 14.506
Richardson, TX 84112-9303
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