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Announced layoffs: Their effect on corporate financial performance
Author(s) -
De Meuse Kenneth P.,
Vanderheiden Paul A.,
Bergmann Thomas J.
Publication year - 1994
Publication title -
human resource management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.888
H-Index - 94
eISSN - 1099-050X
pISSN - 0090-4848
DOI - 10.1002/hrm.3930330403
Subject(s) - layoff , lagging , business , retrenchment , finance , accounting , labour economics , economics , unemployment , economic growth , political science , medicine , public administration , pathology
Conventional wisdom holds that when a firm gets into trouble due to lagging sales and rising costs, cutting the size of the organization to reduce fat and waste is a normal and effective response. In this study, evidence was found to suggest that just the opposite might be true. The financial performance of Fortune 100 companies was tracked over a five‐year period—two years prior to the announced layoff, the year of the layoff announcement, and two years following it. Contrary to expectations, the results indicate that financial performance worsened , rather than improved, following announced layoffs. Strategic and human resource implications for the management of corporate downsizing are provided.