Please use this identifier to cite or link to this item: http://arks.princeton.edu/ark:/88435/dsp01xk81jk37r

 Title: Have Employment Reductions Become Good News for Shareholders? The Effect of Job Loss Announcements on Stock Prices, 1970-97 Authors: Farber, Henry S.Hallock, Kevin Keywords: layoffsjob lossevent studies Issue Date: 1-Jun-1999 Series/Report no.: Working Papers (Princeton University. Industrial Relations Section) ; 417 Abstract: We study the reaction of stock prices to announcements of reductions in force (RIFs) using a sample of nearly 3878 such announcements in 1176 large ﬁrms during the 1970-97 period collected from the Wall Street Journal Index. We note that, although there has been a dramatic secular increase in news stories related to job loss, the total number of actual announcements for the ﬁrms in our sample follows the business cycle quite closely. We then examine changes over time in standard summary statistics (means, medians, fraction negative) of the distribution of stock market reactions as well as changes over time in kernel density estimates of this distribution. We ﬁnd clear evidence that the distribution of stock market reactions has shifted to the right (became less negative) over time. One possible explanation for this change is that, over the last three decades, RIFs designed to improve efficiency have become more common relative to RIFs designed to cope with reductions in product demand. We ﬁnd that, although this explanation shows some promise, most of the decline in the negative average stock price reaction remains unexplained. URI: http://arks.princeton.edu/ark:/88435/dsp01xk81jk37r Appears in Collections: IRS Working Papers

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