SSRN-How Do Shareholders Respond to Downsizing? A Meta-Analysis by Gunther Capelle-Blancard, Nicolas Couderc

May try to comment on this one in a bit, but a friend sent it to me and it is an interesting look at whether downsizing is bad or not. The authors find there to be a negative reaction to the news. Why? Most likely because it signals that conditions within the firm are not very good.

SSRN-How Do Shareholders Respond to Downsizing? A Meta-Analysis by Gunther Capelle-Blancard, Nicolas Couderc:

"...show that layoffs announcements have an overall negative effect on stock market prices, and this remains true whatever the country, the period of time or the type of firm considered. However, some factors may ease as well as worsen the stock market's reaction to such announcements. The reason for the layoff decision is among the most decisive factors and the market sanction will be more severe in the case of defensive layoffs (taken by firms facing difficulties) than for offensive layoffs (when they are part of a more general reorganization strategy).

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