Literature Review Women on boards and in TMTS and firm performance130 It can be deduced that layoffs can be executed fas ter and at relatively lower costs in countries with less stringent employment protection legislation In countries with strict legislation on the other hand dismissals are likely to extend over a long period of time they will most likely cause significantly higher costs and resistance from employees and unions is to be expected Hypothesis 4 Market reactions to layoff announcements will differ depending on the strictness of employment protection legislation Hypothesis 4a Market reaction to layoff announcements will be positive in countries with less stringent employ ment protection legislation Hypothesis 4b Market reaction to layoff announcements will be negative in countries with strict employment pro tection legislation 5 3 3 4 Absolute and relative layoff size According to Gerpott 2007 the magnitude of staff cuts is the second most frequently investiga ted characteristic of reductions in workforce pro grams in studies up to and including 2006 and it remains a variable frequently examined in subse quent studies e g Brookman et al 2007b Cagle et al 2009 Hillier et al 2007 The relative layoff size is determined as the ratio of the number of workers to be released to total staff at the begin ning of the year of the announcement The size of a firm s planned job cuts is one im portant signal to the market as it is an indication for the gravity of the company s financial situa tion Lee 1997 Very low downsizing ratios are not likely to induce a noticeable market reaction Empirical evidence shows that market reactions to large layoffs are stronger and more negative than to small layoffs Elayan et al 1998 Hillier et al 2007 Worrell et al 1991 However there is no established definition of a threshold As Gerpott 2007 points out the th reshold value varies between 0 5 percent Nixon Hitt Lee Jeong 2004 and 5 0 percent Iqbal Akhige 1997 whereas Hahn and Reyes 2004 use the absolute figure of 1 000 employees to be released Hillier et al 2007 for example report clearly stronger negative CAARs for layoff sizes above their sample s median relative layoff size of 4 10 percent The median relative layoff sizes in analyses of the financial sector vary considerab ly The average percentage of employees released by banks in Cagle et al s 2009 analysis is 8 14 percent for the period of 1994 to 2003 Marshall et al 2012 report an average of 2 5 percent for banks and financial services for the time period 2005 to 2006 and an average percentage of 4 7 percent for the crisis year 2008 Large scale staff cuts create the highest risk of lo sing valuable human capital with a probable ne gative impact on future cash flows Nixon et al 2004 This is particularly relevant for the labor intensive services industry including the financial sector Elayan et al 1998 The relative share of highly qualified and valuable employees is higher in large scale dismissals than in selective layoffs Worrell et al 1991 Layoffs by banks are thus expected to induce a strong negative stock price reaction In Marshall et al s 2012 sample the relative size of layoffs increases in almost all surveyed indust ries from 2005 2006 to 2008 Unsurprisingly these increases are strongest for banks and financial ser vices but also for the media as well as the consu mer products and the mining industry The largest Layoffs and shareholder wealth

Vorschau DIRK-Forschungsreihe Band 21 Workforce diversity and personal policies Seite 130
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