This is my first research project in which I was a co-author. The paper started as a team assignment for the university course called Introduction to Financial Data Analysis. As it was an outstanding paper with a relevant subject, our lecturer recommended improving it and participating in the Scientific Students’ Association Conference organised by the Corvinus University of Budapest. It was a tight contest but we were nominated to the National Scientific Students’ Association Conference.
In our study, we examined the effect of companies’ layoff announcements on the stock market via the event study methodology in the programming language R. We also analysed the market reaction differences between tech and non-tech sectors. We found that, despite adverse market conditions, the stocks of the companies that laid off workers had positive cumulated average abnormal returns. We also find a statistically significant difference between the stock market reaction of the tech and the non-tech sectors. We concluded that layoffs can result in positive abnormal returns for a company’s stock given that it has a cost-efficiency-enhancing purpose, and it can also vary depending on the human resource necessity of the given industry the company is functioning in.
The year 2022 is considered a rather turbulent period in the stock market. Attenuating the negative effects of the crisis, several companies decided to perform massive layoffs. In our study, we examine the effect of these layoff announcements on the stock market via the event study methodology. We also analyze the market reaction differences between tech and non-tech sectors. We find that, despite adverse market conditions, the stocks of the companies that laid off workers had positive cumulated average abnormal returns. We also find a statistically significant difference between the stock market reaction of the tech and the non-tech sectors. In addition, we perform a detailed robustness analysis to confirm the validity of our used models. We conclude that layoffs can result in positive abnormal returns for a company’s stock given that it has a cost-efficiency-enhancing purpose, and it can also vary depending on the human resource necessity of the given industry the company is functioning in.