Work

Are employee decisions informative in the stock market? Evidence from employee downsizing in Japan

Year: 2024

Type: article

Abstract: This study investigates whether employee decisions on downsizing program applications convey private information in Japan. We find that the stock market reacts negatively to downsizing announcements with both substantial excess and shortfall outcomes. Additional analyses reveal that the negative market reactions for shortfall announcements are driven by those with a positive market reaction to the initial announcement and that firms with a shortfall in downsizing initially propose larger downsizing targets. These findings suggest that employee decisions during downsizing processes convey private information to stock investors and that managers may strategically set higher downsizing expectations to meet a desired downsizing target.

Source: Finance research letters

DOI: 10.1016/j.frl.2024.106611

Authors: Keishi Fujiyama, Yusuke Fukaya, Philip Keejae Hong, Toshio Moriwaki

Institutions: Kobe University, J. F. Oberlin University, Central Michigan University, The University of Kitakyushu

Language: English

Topic: Organizational Downsizing and Restructuring

Subfield: Organizational Behavior and Human Resource Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $3,350