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Rival Growth Prospects and Equity Prices: Evidence from Mass Layoff Announcements


We investigate the impact of mass layoff announcements on the equity value of industry rivals. When a layoff announcement conveys good (bad) news for the announcer, rivals on average witness a 0.44 percent increase (0.60 percent decrease) in cumulative abnormal stock returns. This effect is concentrated on rivals with high growth opportunities. Consistent with this finding, we also show that our results are strongest in technology industries, where growth opportunities matter the most. Our results suggest that investors perceive layoff announcements as news about industry prospects rather than just the announcer.

Keywords: Mass Layoffs, Rivals, Firm characteristics.
JEL Codes: J63, G14.


Suggested citation: Bordeman, Adam, Bharadwaj Kannan, and Roberto Pinheiro, 2018. “Rival Growth Prospects and Equity Prices: Evidence from Mass Layoff Announcements,” Federal Reserve Bank of Cleveland Working Paper, no. 16-10R. https://doi.org/10.26509/frbc-wp-201610r.

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