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July 25, 2008 9:53:45 PM CDT

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Layoffs Sink Stock Prices, Says Study

Posted Apr 29, 07 8:00 AM CDT in Business 

(Newser) – Economists have long doubted the precept that cutting a company's payroll will lead to a spike in its stock price. But try telling that to CEOs, who are still trying to emulate the turnarounds achieved by G.E. and Proctor & Gamble. Now, a study reveals that markets actually have "a significantly negative" reaction to downsizing.

The essential problem, argues James Surowiecki in the New Yorker, is that workers are being measured in payroll cuts instead of the value they create. Firings that misfired at Citigroup and Circuit City should prove the value of a stable workforce, but CEOs desperate to please investors remain myopic when it comes to trading jobs for points. 

Source New Yorker

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  (Associated Press)
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US economy  • stock market  • business  • Citigroup  • economics  • layoffs  • Proctor


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