Literature Review Women on boards and in TMTS and firm performance128 firms significantly underperformed the market du ring the three year period prior to the announce ment It seems as if investors were at least partly aware of the firm s poor financial condition Elay an et al 1998 find negative abnormal returns for their total sample The results support the declining investment hypothesis Firms with a performance24 below the industry average in the two years prior to the announcement experience no significant market reaction suggesting that poor performance was already factored in and staff cuts were anticipated Negative market reactions to no tifications from firms with a prior performance abo ve the industry average indicate that capital mar kets were taken by surprise and had to revise their forecasts downwards Elayan et al 1998 Iqbal and Shetty s 1995 findings in contrast indicate that financially weak firms experience a positive market reaction whereas stock returns of financi ally healthy firms are negative and lower Their interpretation is that from the investors perspec tive the potential benefits of staff cuts are less for financially sound firms The authors conclude that those firms should consider alternative solutions to dismissals such as pay cuts working time reduction or job sharing Iqbal Shetty 1995 Worrell et al 1991 show that both groups of firms experience negative share price reactions whereby the layoffs related to financial distress are significantly more negative Fall in demand Declining demand for the bank s products and ser vices may make it necessary to reduce staff and costs Madura et al 1995 Decreasing demand may be caused by poor product quality reduced competitiveness weakened brand reputation or general shifts in demand It may also be initiated by a recession with declining stock markets In the case of US banks for instance the subprime cri sis and the collapse of the US housing market led to an extreme fall in demand for mortgage loans Layoffs occurred as a result of mortgage banks specialized branches and bank business units or special purpose entities responsible for securitizati on of loans Layoffs in response to a fall in demand can be classified as a reactive measure Market re action to layoffs justified with a slump in demand is rather negative Hahn Reyes 2004 Palmon et al 1997 Hypothesis 2 Market reactions to layoff announcements will dif fer depending on the stated reason Hypothesis 2a Market reaction will be positive for the stated reasons reorganization cost cutting and branch closure Hypothesis 2b Market reaction will be neutral for stated reason mergers and acquisitions Hypothesis 2c Market reaction will be negative for stated reasons fall in demand and poor past performance 5 3 3 2 Business cycle stock market conditions Farber and Hallock 2009 find that the number of layoff announcements closely follows the gene ral business cycle From the investors viewpoint layoffs during recession and declining markets are likely to be perceived as reactive to economic con ditions and poor future prospects Marshall et al 2012 The financial sector was severely impacted by the financial crisis that began in late 2007 thus the stock price reaction to layoff announcements is expected to be materially different from that of 24 Measured by Return on Equity ROE reflecting the firm s performance and efficiency and by Net Income per Employee NI EM and Sales per Employee SL EM both reflecting the efficiency of the firm s labor force Layoffs and shareholder wealth

Vorschau DIRK-Forschungsreihe Band 21 Workforce diversity and personal policies Seite 128
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