Do Powerful Politicians Really Cause Corporate Downsizing?

Jason Alan Snyder; Ivo Welch

doi:10.1086/694204

Book Review: The Senior Year Experience: Facilitating Integration, Reflection, Closure, and Transition

NASPA Journal ◽

10.2202/0027-6014.1109 ◽

2000 ◽

Vol 37 (3) ◽

Author(s):

Gary R. Ratcliff

Keyword(s):

College Students ◽

Living Conditions ◽

Public Concern ◽

Senior Year ◽

Economic Distress ◽

Corporate Downsizing

Changes in the economy have shaken society's belief that living conditions in America will improve generation after generation. At the start of this decade, stagnated wages and corporate downsizing heightened public concern about decreasing mobility and declining fortunes (Newman, 1993). Today, college students, many of whom come from families that have experienced economic distress, worry about finding a job, affording a family, and boomeranging home (Levine & Cureton, 1998).

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To downsize or not to downsize: when and how does corporate downsizing create long-term value?

Management Research Review ◽

10.1108/mrr-09-2020-0552 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Mishari Alnahedh ◽

Abdullatif Alrashdan

Keyword(s):

Positive Relationship ◽

Business Environment ◽

Strategic Decision ◽

Value Appropriation ◽

Empirical Examination ◽

Content Type ◽

Growth And Survival ◽

Moderation Effect ◽

Corporate Downsizing

Purpose How does corporate downsizing contribute to a firm’s long-term value? While the extant empirical findings on this relationship are inconclusive, contradictory and equivocal, the answers to this question remain particularly important in today’s business environment. Considering that downsizing is often directed toward long-term growth and survival, this paper aims to posit that scholars should account for the temporal nature of this strategic decision to understand its economic impact on the firm’s operations. Therefore, this paper provides a more rigorous empirical examination of how a firm’s decision to downsize its workforce affects that firm’s long-term value. Design/methodology/approach This paper used Wibbens and Siggelkow’s (2020) measure of long-term investor value appropriation (LIVA) to directly observe the effects of corporate downsizing on firm long-term value and growth. Using a sample of 3,149 US publicly traded manufacturing firms that operated between 2002 to 2018, this paper tested the main effect of downsizing on LIVA and 3 boundary condition hypotheses. Findings This paper found a positive relationship between corporate downsizing and a firm’s long-term value. Interestingly, this positive relationship is stronger among firms that had high human resource slack and R&D intensity. Contrary to the expectations, this paper did not find support for the moderation effect of the proximity to bankruptcy on the relationship between corporate downsizing and a firm’s long-term value. Originality/value With these findings, the paper sheds light on the long-term implications of a firm’s decision to downsize its workforce.

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