Employee Layoffs, Shareholder Wealth and Firm Performance: Evidence from the UK

28 Pages Posted: 4 Jun 2007

See all articles by David Hillier

David Hillier

University of Strathclyde - Department of Accounting and Finance

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School

Patrick McColgan

University of Strathclyde

Samwel Werema

University of Strathclyde - Department of Accounting and Finance

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.

Suggested Citation

Hillier, David and Marshall, Andrew P. and McColgan, Patrick and Werema, Samwel, Employee Layoffs, Shareholder Wealth and Firm Performance: Evidence from the UK. Journal of Business Finance & Accounting, Vol. 34, No. 3-4, pp. 467-494, April/May 2007. Available at SSRN: https://ssrn.com/abstract=990919 or http://dx.doi.org/10.1111/j.1468-5957.2007.02042.x

David Hillier

University of Strathclyde - Department of Accounting and Finance ( email )

Curran Building
100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 330 4809 (Phone)
44 0141 330 4442 (Fax)

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School ( email )

100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 548 3894 (Phone)

Patrick McColgan (Contact Author)

University of Strathclyde ( email )

Curran Building
100 Cathedral Street
Glasgow, G4 0LN
United Kingdom
+44 1415483690 (Phone)

Samwel Werema

University of Strathclyde - Department of Accounting and Finance ( email )

Curran Building
100 Cathedral Street
Glasgow G4 0LN
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
13
Abstract Views
1,447
PlumX Metrics