Tampere University of Technology

TUTCRIS Research Portal

Layoff announcements and intra-day market reactions

Research output: Contribution to journalArticleScientificpeer-review

Details

Original languageEnglish
Pages (from-to)203–228
Number of pages26
JournalReview of Managerial Science
Volume12
Issue number1
Early online date2016
DOIs
Publication statusPublished - Jan 2018
Publication typeA1 Journal article-refereed

Abstract

This paper examines investor intra-day reactions related to two types of layoff announcements, the first one at the start of layoff negotiations and the other at the final layoff decisions. We provide statistically significant evidence that, on average, investors have strongly negative reaction to layoff negotiations within the first 10 minutes. However, we also provide strong evidence that the first negative reaction is reversed by an upward post-drift in aggregated cumulative abnormal returns in the following hours, perhaps because markets need hours to process such unpredictable and complex information and its consequences – even if their first reaction was strong and immediate. Moreover, on the aggregated level, final layoff announcements do not generally convey information that is exceptionally useful to investors, except when reactions to associated initial announcements have not been statistically significant. Importantly, our analysis demonstrates the importance of the use of intra-day data: The reactions, which can be strong but short-lived, are identifiable with intra-day data only. Finally, we find that intra-day reactions cannot be explained by various company background characteristics, such as the number of employees, sales, profitability, and assets/liabilities ratio.

Publication forum classification

Field of science, Statistics Finland

Downloads statistics

No data available