Financial Consequences of Employment-Change Decisions in Major U.S. Corporations

Abstract

Using data from companies in the Standard & Poor's 500 between 1980 and 1994, we examined 5,479 occurrences of changes in employment in terms of two dependent variables: profitability (return on assets) and return on common stock, Firms that engaged in pure employment downsizing did not show significantly higher returns than the average companies in their own industries. However, companies that combined employment downsizing with asset restructuring generated higher returns on assets and stock returns than firms in their own industries.