Do Press Announcements Of Corporate Downsizing Predict Actual Downsizing?

Abstract

We investigate the determinants of actual downsizing following corporate press announcements of downsizing and find that some announcements are followed by lower growth rates in assets and employees and some are not. Our analysis indicates that the downsizing announcement sometimes implies net downsizing and sometimes implies strategic re-alignment of assets. Firms with increased asset and employee growth rates have higher market to book, a proxy for investment opportunities. In contrast, ex-post decreases in growth occur for firms with lower operating performance. Further we find that during a normal economy, board independence is also associated with lower ex-post growth, but not during a period of economic decline. This suggests a relatively more board involvement in asset restructuring during normal or boom times. The results provide new evidence on the nature of information contained in announcements of asset downsizing and employee layoffs.

Keywords

• Restructuring,layoffs,downsizing,press announcements,board independence.

References

1. Ahn, S., and M. D. Walker, 2007.Corporate Governance and the Spinoff Decision. Journal of Corporate Finance 13, 76-93.
2. Atanassov, J., and E. H. Kim, 2009. Labor and corporate governance: International evidence from restructuring decisions. Journal of Finance 64, 341-37.
3. Chan L. K. C., H. L. Chen, and J.Lakonishok, 2002, On mutual fund investment styles, Review of Financial Studies 15, 1407-1437.
4. Daley, L., V. Mehrotra, and R. Sivakumar, 1997, Corporate focus and value creation: Evidence from spinoffs, Journal of Financial Economics 45, 257 – 281.
5. Denis, D. and T. Kruse 2000. Managerial Discipline and Corporate Restructuring Following
6. Performance Declines, Journal of Financial Economics 55, 391-424. Denis, D., and D. Shome, 2005, An Empirical Investigation of Corporate Asset Downsizing, Journal of Corporate Finance 11, June, 427-448.
7. Espahbodi, R., John, T.A., and G. Vasudevan, 2000, The effects of downsizing on operating performance, Review of Quantitative Finance and Accounting, 15, 107-126.
8. Farrell, K. A. and D. A. Whidbee, 2002 Monitoring by the financial press and forced CEO turnover, Journal of Banking and Finance 26, 2249–2276.

9. Fazzari, S. M., Hubbard, R. G., Peterson, B. C., Blinder, A. S., and J. M. Poterba, 1988. Financing constraints and corporate investment.Brooking Papers on Economic Activity 1, 141-206.
10. Hanson, R. C. and M. H. Song, 2000, Managerial Ownership, Board Structure, and the Division of Gains, Journal of Corporate Finance, 6, 55–70.
11. Hoshi, T., Kashyap, A., and D. Scharfstein, 1991. Corporate structure, liquidity, and investment: Evidence from Japanese industrial groups. Quarterly Journal of Economics 106, 33-60.
12. Huson, M. R., Paul H. M., and R. Parrino, 2004, Managerial succession and firm performance.
13. Journal of Financial Economics 74, 237 – 275. Jiang, H., 2010, Institutional investors, intangible information and the book-to-market effect, Journal of Financial Economics 96, 98-127.
14. John, K., L.H.P. Lang, and J. Netter, 1992, The voluntary restructuring of large firms in response to performance declines, Journal of Finance 47, 891-918.
15. John, K. and E. Ofek, 1995, Asset sales and increase in focus, Journal of Financial Economics 37, 105-1
16. Kang, J.-K., and A. Shivdasani, 1997. Corporate restructuring during performance declines in
17. Japan. Journal of Financial Economics 46, 29-65. Kang, J.-K., Lee, I., and H.S. Na, 2010. Economic shock, owner-manager incentives, and corporate restructuring: Evidence from the financial crisis in Korea. Journal of Corporate Finance 16, 333-351.
18. Lang, L., A. Poulsen, R. Stulz, 1995. Asset Sales, Firm Performance, and the Agency Costs of
19. Managerial Discretion, Journal of Financial Economics 37, 3–37. Maksimovic, V., Phillips, G., 2001. The market for corporate assets: Who engages in mergers and asset sales and are there efficiency gains? Journal of Finance 56, 2019–2065.
20. Mulherin, J. H., Boone, A. L., 2000. "Comparing acquisitions and divestitures," Journal of Corporate Finance 6, 117-139.
21. Offenberg, D. (2009). Firm size and the effectiveness of the market for corporate control. Journal of Corporate Finance 15, 66-79.
22. Paul, D.L.,2007. Board composition and corrective action: evidence from corporate responses to bad acquisition bids. Journal of Financial and Quantitative Analysis 42,759–784.
23. Perry, T. and A. Shivdasani. 2005. Do Boards Affect Performance? Evidence from Corporate
24. Restructuring, Journal of Business 78, 1403-1431.
25. Yang, Liu 2008.The real determinants of asset sales. Journal of Finance 63, 2231–62.
26. Zhou, Y. M., Xiaoyang, L., and J. Svejnar, 2011. Subsidiary divestiture and acquisition in a financial crisis: Operational focus, financial constraints, and ownership. Journal of Corporate Finance 17, 272-287. Appendix 1
27. Descriptive Statistics The sample comprises 252 S&P 1500 firms in calendar years 2005 or 2006 (early sample), and 417 S&P 1500 firms in calendar year 2008 or 2009 (late sample) making announcements of layoffs or asset downsizing. The non-announcer sample contains 219 S&P 1500 firms for early sample period and 261 S&P 1500 firms for late sample period with a significant decline in performance and no downsizing announcement. Performance decline is defined as change of return on sales (ROS) from 2004 to 2005 for early sample period, or from 2007 to 2008 for late sample period, less than lowest quartile of change in ROS of sample firms. All the variables are obtained from CRSPSift. Total assets is book value of assets. Leverage is long-term debt divided by long-term debt plus common equity. Market to book value is market cap plus total assets minus common equity divided by total assets. Market cap is year-end stock price times year-end common shares outstanding. Capex is capital expenditures divided by total assets. Return on sales (ROS) is EBITDA divided by net sales. For sample firms, all data are calculated in the year before the announcement (t-1). For non-announcing firms, all data arecalculated in year 2004 for early sample period, and 2007 for late sample period. a, b, and c denote significance between early period sample firms and late period sample firms at 1%, 5% and 10% levels, respectively.
28. Mean (Median) Sample Firm Mean (Median) Nonannouncers with performance decline P-value for sample vs. non-announcers 20052006 2008-2009 2005-2006 2008-2009 20052006 20082009
29. Total Assets 41144 45946 10709 20876 0.0066 0.0429 (4525) (5655) b (9073) (1716) a (0.0001) (0.0000) Leverage 0.3293 0.4176 0.2754 0.2454 0.0172 0.0810 (0.3265) (0.3112) (0.2321) (0.2139) (0.0058) (0.0000) MV/BV Assets 8390 5836 a 8074 4935 a 0.7303 0.1782 (5270) (3323) a (4365) (2031) a (0.3336) (0.0294) Capex 0.0366 0.0461 a 0.0424 0.0452 0.1059 0.8400 (0.0287) (0.0343) b (0.0277) (0.0184) a (0.9585) (0.0000) Return on Sales 0.1745 0.1521 0.1527 -0.2253 0.1806 0.1758 (0.1419) (0.1478) (0.1341) (0.1440) (0.1254) (0.4263) Change in ROS
30. (t-1 to t) -0.6251 0.3608 c -0.9700 -1617 0.5589 0.0010 (-0.0186) (-0.0550) b (-0.2564) (-0.4359) a (0.0001) (0.0000) N 252 417 219 261
31. Appendix 2: Change in Assets and Employees Percentage change in asset (Panel A) and number of employees (Panel B) from the year before announcement (t-1) to the year of announcement (t), and from the year of announcement (t) to the year after announcement (t+1). Samples and variables are described in the Appendix1 header. Panel A: Percentage Change in Book Value of Assets (2005-2006) (1) All Sample firms N (2) Nonannouncers N (3)Sample firms in Q1 of ROS change N P-value (1) vs. (2)
32. Panel B: Percentage Change in Number of Employees (2005-2006) (1) All Sample firms N (2) Nonannouncers N (3)Sample firms in Q1 of ROS change N P-value (1) vs. (2)
33. Panel C: Percentage Change in Book Value of Assets (2008-2009) (1) All Sample firms N (2) Nonannouncers N (3)Sample firms in Q1 of ROS change N P-value (1) vs. (2)
34. Panel D: Percentage Change in Number of Employees (2008-2009) (1) All Sample firms N (2) Nonannouncers N (3)Sample firms in Q1 of ROS change N P-value (1) vs. (2) Panel A: Total assets growth (t-1 to t+1) 2005-2006 2008-2009 (1) Low (bottom third)
35. Panel B: Employee growth (t-1 to t+1) 2005-2006 2008-2009 (1) Low (bottom third) (2) High (Top third) P-value (1) vs. (2) (1) Low (bottom third) (2) High (Top third) P-value (1) vs. (2)
36. ROS 0.1545 0.2134 0.0131 0.0708 0.2121 0.0726 (0.1273) (0.1680) (0.0058) (0.1229) (0.1862) (0.0001)
37. Market to Book 5943 1991 0.0002 4757 8027 0.0032 (3571) (6774) (0.0000) (2606) (4680) (0.0035)
38. Panel C Non-Announcers: total assets growth (t-1 to t+1) 2005-2006 2008-2009 (1) Low (bottom third) (2) High (Top third) P-value (1) vs. (2) (1) Low (bottom third) (2) High (Top third) P-value (1) vs. (2)
39. ROS 0.0968 0.1775 0.0232 0.0398 0.1381 0.3878 (0.0896) (0.1661) (0.0002) (0.0830) (0.2069) (0.0000)
40. Market to Book 4820 1557 0.0003 4129 6991 0.0711 (3107) (5946) (0.0002) (1519) (3366) (0.0026)
41. Panel D Non-Announcers: Employee growth (t-1 to t+1) 2005-2006 2008-2009 (1) Low (bottom third) (2) High (Top third) P-value (1) vs. (2) (1) Low (bottom third) (2) High (Top third) P-value (1) vs. (2)
42. ROS 0.1263 0.1560 0.3862 0.1168 0.1561 0.6396 (0.0972) (0.1631) (0.0057) (0.1080) (0.2079) (0.0002) 6161 0.0156 3641 0.0000 3166 (2554) (0.1689) (0.0000) (0982) (3059) (0.0015) Appendix 4
43. OLS Coefficients for Change in Assets and Employees OLS coefficient estimates for determinants of changes in total assets and number of employees from the year before announcement to the year of announcement for sample firms, from 2004 to 2006 for non-announcers in early sample period, and from 2007 to 2009 for non-announcers in late sample period. The dependent variable equals the percentage change in total assets (Panel A) or number of employees (Panel B). ROS is EBITDA divided by net sales. Market to book value is market cap plus total assets minus common equity divided by total assets. Market cap is year-end stock price time year-end common shares outstanding. Leverage is long-term debt divided by long-term debt plus total common equity. Board data are from ISS RiskMetrics Group. Institutional ownership is year-end institutional holding (from 13f) divided by year-end total number of share outstanding. All independent variables collected in the year before the announcement (t-1) for sample firms, in 2004 for non-announcers in early sample period, and in 2007 for non-announcers in late sample period. Columns (1) (3) (5) and (7) contain sample firms in 2005-06, and columns (2) (4) (6) and (8) contain sample firms in 2008-09. ***, **, and * denote significance at 1%, 5% and 10% levels, respectively.
44. Panel A: Change in Total Assets (t-1 to t+1) Sample of Announcers Announce divestiture only Announce layoff only Non-announcers with performance decline (1) (2) (3) (4) (5) (6) (7) (8) 0.4661** 0.0443 0.6150** 0.0496 -0.2307 0.3251** 0.7343*** 0.1416 (0.0487) (0.1259) (0.0465) (0.1731) (0.4485) (0.0365) (0.0003) (0.2906) Change in ROS (t-1 to t) 0.0002 0.0027 -0.0118 0.0204 -0.0004 0.0029 0.0111 0.0126 (0.9365) (0.2067) (0.3498) (0.4693) (0.8765) (0.1719) (0.2308) (0.3772) Board Independence -0.4181** 0.3122* -0.3526 0.4517 -0.4270* 0.2318 -0.1116 -0.3227 (0.0230) (0.0581) (0.1364) (0.1191) (0.0548) (0.1932) (0.5510) (0.1009) Institutional ownership 0.1093 0.0165 -0.1129 -0.0843 0.4211** -0.0125 0.2437 0.0043 (0.5135) (0.9060) (0.5804) (0.7456) (0.0435) (0.9354) (0.1530) (0.9780) Market value/ Book value 0.1677*** 0.0937*** 0.1894*** 0.0966** 0.1978*** 0.0860*** 0.0973*** 0.0885*** (0.0000) (0.0000) (0.0000) (0.0143) (0.0000) (0.0001) (0.0041) (0.0024) R&D/sales 0.3654 -0.6591** 0.2936 -0203** 0.5293* -0.4787 0.6617*** 0.1933 (0.2494) (0.0172) (0.6731) (0.0495) (0.0827) (0.1801) (0.0047) (0.2061) Capex/total assets -0.3798 0.4155 -0.7085 0.1987 -0.4555 0.2029 -0.1217 0.0781 (0.6568) (0.2277) (0.5053) (0.7506) (0.7067) (0.5946) (0.8580) (0.8213) Book leverage -0.0876 -0.0064 -0.1472 0.1987 0.1514 -0.0042 0.3166** 0.2394** (0.4931) (0.4794) (0.3459) (0.8242) (0.3896) (0.6290) (0.0293) (0.0366) Log (book value of assets) 0.0101 0.0208 -0.0001 0.0152 0.0359 0.0130 -0.0680*** 0.0248 (0.6374) (0.1098) (0.9979) (0.5170) (0.1918) (0.3741) (0.0069) (0.2064) Employees/ Sales -1402 0781 -8441 6674 0980 -0.6617 -0.0680*** -0.3599 (0.4169) (0.3522) (0.2426) (0.1448) (0.3945) (0.8840) (0.0050) (0.8313) Log (board size) -0.1536 0.0453 -0.1321 0.0483 -0.1566 0.0184 0.0584 0.0673 (0.2808) (0.5779) (0.4699) (0.7328) (0.3854) (0.8454) (0.6721) (0.5316) Manufacturing Non-High-Tech -0.0125 -0.0704* 0.0140 -0.0643 -0.0936 -0.0853** -0.0404 -0.0580 (0.8359) (0.0560) (0.8508) (0.3296) (0.1925) (0.0305) (0.5569) (0.3804) Manufacturing High-Tech -0.0012 0.0751 0.0587 0.1633 -0.0363 0.0598 -0.1611* 0.0986 (0.9883) (0.1702) (0.6632) (0.1096) (0.6910) (0.3132) (0.0730) (0.2116) Intercept 0.2934 -0.6786*** 0.4280 -0.7162 -0.2267 -0.4507 0.0137 -0.3562 (0.4021) (0.0084) (0.3417) (0.1088) (0.6047) (0.1272) (0.9693) (0.2035) Number of observations 219 321 148 143 108 254 169 184 Adjusted R 2 0.2396 0.1026 0.2668 0.0628 0.3256 0.1194 0.2147 0.1051 Sample of Announcers Announce divestiture only Announce layoff only Non-announcers with performance decline (1) (2) (3) (4) (5) (6) (7) (8)
45. ROS 0.2253 0.0489** 0.5099*** 0.0533** -0.4118* 0.1072 0.7646* 0.4533*** (0.1309) (0.0176) (0.0073) (0.0500) (0.0729) (0.3347) (0.0737) (0.0003) Change in ROS
46. (t-1 to t) 0.0006 0.0007 -0.0012 -0.0116 0.0004 0.0006 0.0053 0.0090 (0.7433) (0.6598) (0.8812) (0.5808) (0.8587) (0.6966) (0.7897) (0.4901) Board
47. Independence -0.1363 -0.0098 -0.0529 -0.0003 -0.1153 0.0137 0.0001 -0.1912 (0.2400) (0.9328) (0.7159) (0.9989) (0.4862) (0.9143) (0.9998) (0.2869) Institutional ownership 0.2274** -0.0303 0.1824 -0.3371* 0.2399 0.0469 0.7859** 0.0001 (0.0336) (0.7596) (0.1474) (0.0843) (0.1242) (0.6708) (0.0319) (0.9994) Market value/
48. Book value 0.0731*** 0.0662 0.0590** 0.0517* 0.1050*** 0.0599*** 0.0350 0.0537** (0.0001) (0.0000) (0.0181) (0.0777) (0.0000) (0.0002) (0.6267) (0.0428) R&D/sales 0.0296 -0.6759*** 0.5057 -0.9964** 0.0837 -0.2384 0.6111 0.5162*** (0.8831) (0.0006) (0.2570) (0.0107) (0.7125) (0.3515) (0.2680) (0.0003) Capex/total assets -0.3866 0.0517 -0069 -0.2351 0.3251 -0.0029 -7193 0.1253 (0.4765) (0.8325) (0.1256) (0.6148) (0.7202) (0.9916) (0.2359) (0.6920) Book leverage -0.0981 -0.0036 -0.1103 0.0006 0.0655 -0.0038 0.2056 0.1849* (0.2248) (0.5704) (0.2469) (0.9406) (0.6194) (0.5385) (0.5125) (0.0771) Log (book value of assets) 0.0190 0.0107 0.0061 -0.0094 0.0486** 0.0157 -0.1054** -0.0101 (0.1637) (0.2475) (0.7192) (0.5917) (0.0204) (0.1359) (0.0500) (0.5754) Employees/ Sales 0.5168 0.2467 3727 4679 -2029 -0.0883 -2892 -0.8118 (0.9142) (0.9368) (0.7901) (0.7235) (0.9017) (0.9783) (0.6116) (0.5995) Log
49. (board size) -0.0060 0.0399 0.0188 0.0732 -0.1187 0.0173 0.0545 0.1070 (0.9484) (0.4904) (0.8738) (0.4887) (0.3814) (0.7977) (0.8526) (0.2773) Manufacturing
50. Non-High-Tech 0.0431 -0.0870*** 0.0585 -0.0874* 0.0220 -0.1013*** 0.1001 -0.0898 (0.2600) (0.0009) (0.2023) (0.0770) (0.6839) (0.0004) (0.4925) (0.1390) Manufacturing
51. High-Tech 0.0445 0.0539 0.0257 0.1677** 0.0156 0.0109 -1454 0.1125 (0.3894) (0.1664) (0.7632) (0.0286) (0.8206) (0.7985) (0.4495) (0.1196) Intercept -0.3853* -0.2766 -0.3846 0.0641 -0.4213 -0.3431 0.1020 -0.2650 (0.0977) (0.1290) (0.1934) (0.8470) (0.2005) (0.1056) (0.8940) (0.3007) Number of observations 219 321 148 143 108 254 169 184
52. Adjusted R 2 0.1244 0.1254 0.1335 0.1185 0.1086 0.1179 0.0222 0.1610 Appendix 5
53. OLS Coefficients for Pure Announcers OLS coefficient estimates for determinants of changes in total assets and number of employees from the year before announcement to the year of announcement for 211 firms in 2005-06 and 320 firms in 2008-09 with announcement of either layoff or divestiture, but not both. Samples and variables are described in the header to Appendix4. In Panel C, Early=1 if firm is from 2005-06 sample, otherwise Early=0. Columns (1) (3) (5) and (7) contain sample firms in 2005-06, and columns (2) (4) (6) and (8) contain sample firms in 2008-09. ***, **, and * denote significance at 1%, 5% and 10% levels, respectively.
54. Panel A: Change in Total Assets (t-1 to t+1) Sample of Announcers Announce divestiture only Announce layoff only (1) (2) (3) (4) (5) (6) ROS 0.6542** 0.0399 0.8405** 0.0655 0.0059 0.2847* (0.0161) (0.1549) (0.0267) (0.1157) (0.9896) (0.0846) Change in ROS (t-1 to t) -0.0000 0.0025 -0.0114 0.0346 -0.0022 0.0025 (0.9989) (0.2216) (0.4224) (0.2548) (0.5211) (0.2055) Board Independence -0.4650** 0.2934 -0.3883 0.5286 -0.5316 0.1392 (0.0296) (0.1002) (0.1934) (0.2006) (0.1053) (0.4729) Institutional ownership 0.1386 0.0738 -0.2104 -0.0239 0.6777** 0.0534 (0.4911) (0.6090) (0.4380) (0.9414) (0.0406) (0.7367) Market value/ Book value 0.1628*** 0.0754*** 0.1877*** 0.0336 0.1620*** 0.0708*** (0.0000) (0.0006) (0.0011) (0.5779) (0.0013) (0.0030) R&D/sales 0.2992 -0.7113** -0.3063 -2724** 0.6161 -0.6969* (0.3945) (0.0119) (0.7399) (0.0439) (0.1163) (0.0696) Capex / total assets -0.4261 0.5641 -0.7489 0.8070 -0.2964 0.3653 (0.6543) (0.1292) (0.5530) (0.3531) (0.8569) (0.3883) Book leverage -0.1578 -0.1625* -0.2867 0.0692 0.0634 -0.1730* (0.2798) (0.0530) (0.1318) (0.7349) (0.8115) (0.0641) Log (book value of assets) 0.0121 0.0296** 0.0060 0.0218 0.0557 0.0278* (0.6318) (0.0457) (0.8609) (0.5638) (0.1972) (0.0934) Employees / Sales -7261 0027 -0.8604 4515** 8687 -0.7143 (0.5045) (0.2749) (0.3683) (0.0225) (0.2154) (0.8787) Log (board size) -0.1624 0.0519 -0.1898 -0.0034 -0.1393 0.0103 (0.3196) (0.5463) (0.4085) (0.9853) (0.5906) (0.9197) Manufacturing Non-High-Tech 0.0257 -0.0471 0.0854 0.0223 -0.0246 -0.0651 (0.7208) (0.2432) (0.3800) (0.8265) (0.8226) (0.1300) Manufacturing High-Tech 0.0110 0.0360 0.1714 0.1253 -0.0366 0.0220 (0.9039) (0.5433) (0.3382) (0.4086) (0.7608) (0.7292) Intercept 0.3167 -0.7377*** 0.6075 -0.8454 -0.5963 -0.4581 (0.4390) (0.0066) (0.2949) (0.1325) (0.3738) (0.1496) Number of observations 182 245 111 67 71 178 Adjusted R 2 0.1961 0.1139 0.2237 0.0815 0.1659 0.1264
55. Sample of Announcers Announce divestiture only Announce layoff only (1) (2) (3) (4) (5) (6) ROS 0.3677** 0.0447** 0.7537*** 0.0495* -0.3003 0.0471 (0.0248) (0.0157) (0.0005) (0.0936) (0.3583) (0.6458)
56. Change in ROS (t-1 to t) 0.0007 0.0006 0.0013 -0.0097 0.0002 0.0003 (0.7372) (0.6696) (0.8669) (0.6501) (0.9443) (0.8046)
57. Board Independence -0.1667 -0.0632 -0.0508 -0.1485 -0.1683 -0.0646 (0.1943) (0.5897) (0.7628) (0.6091) (0.4681) (0.5927)
58. Institutional ownership 0.2414** 0.0501 0.1829 -0.2890 0.3095 0.1719* (0.0498) (0.5978) (0.2369) (0.2124) (0.1851) (0.0837)
59. Market value/ Book value 0.0706*** 0.0659*** 0.0644** 0.0530 0.0958*** 0.0630*** (0.0011) (0.0000) (0.0421) (0.2165) (0.0070) (0.0000)
60. R&D/sales -0.0648 -0.7337*** 0.2680 -2088*** -0.0065 -0.2665 (0.7601) (0.0000) (0.6064) (0.0077) (0.9812) (0.2639)
61. Capex / total assets -0.5654 0.2715 -3933* 0.5353 0.2085 0.3450 (0.3274) (0.2667) (0.0524) (0.3839) (0.8589) (0.1914)
62. Book leverage -0.1619* -0.0855 -0.1970* 0.0187 -0.0292 -0.0426 (0.0667) (0.1213) (0.0660) (0.8971) (0.8776) (0.4626)
63. Log (book value of assets) 0.0096 0.0179* -0.0101 -0.0136 0.0357 0.0297*** (0.5310) (0.0668) (0.5997) (0.6091) (0.2456) (0.0044)
64. Employees / Sales 0.9283 -0.0912 5858 8760 3545 -0.5179 (0.8582) (0.9758) (0.7779) (0.5502) (0.7370) (0.8590)
65. Log (board size) 0.0660 0.0449 0.1560 0.1149 0.0378 -0.0009 (0.5174) (0.4276) (0.2606) (0.3847) (0.8377) (0.9886) Manufacturing
66. Non-High-Tech 0.0431 -0.0618** 0.0632 -0.0003 0.0190 -0.0782*** (0.3217) (0.0204) (0.2488) (0.9972) (0.8087) (0.0038)
67. Manufacturing High-Tech 0.0451 0.0261 0.0414 0.1569 0.0064 -0.0264 (0.4155) (0.5035) (0.6801) (0.1464) (0.9402) (0.5049)
68. Intercept -0.4436* -0.3511** -0.5656 0.0069 -0.6541 -0.4538** (0.0902) (0.0485) (0.1161) (0.9860) (0.1734) (0.0225)
69. Number of observations 182 245 111 67 71 178 Adjusted R 2 0.1378 0.1709 0.1789 0.1674 0.0090 0.1901
70. Change in Total Assets (t-1 to t+1) Change in Employees (t-1 to t+1) Sample of Announcers Announce divestiture only Announce layoff only Sample of Announcers Announce divestiture only Announce layoff only (1) (2) (3) (4) (5) (6) 2898*** 4873** 0.9418 0.0774 0.0874 -0.2537
71. (0.0041) (0.0110) (0.2281) (0.7864) (0.8084) (0.6407) 0.0310 0.2264 0.0658 0.0453** 0.1091 0.0563**
72. (0.3520) (0.2674) (0.1066) (0.0296) (0.3665) (0.0484) 0.5522*** 0.3762 0.2446 0.1542 0.2165 -0.1803
73. (0.0044) (0.1799) (0.5433) (0.2007) (0.1926) (0.5204) 0.0026 0.0032 -0.0152 0.0006 0.0008 -0.0369**
74. (0.2926) (0.2060) (0.5659) (0.7177) (0.5910) (0.0468) -0.0034 -0.0172 0.0131 -0.0004 -0.0025 0.0377**
75. (0.3616) (0.1267) (0.6213) (0.8537) (0.7126) (0.0441) 0.3312 0.1293 0.6631 -0.0372 -0.0463 -0.1095
76. (0.1219) (0.6028) (0.1226) (0.7801) (0.7528) (0.7134)
77. Board Independence*Early -0.7991*** -0.6363* -1435** -0.1333 -0.1266 -0.0431 (0.0040) (0.0554) (0.0339) (0.4392) (0.5195) (0.9079) 0.0191 0.0249 0.0088 0.0038 0.1017 -0.2318 (0.9110) (0.9009) (0.9792) (0.9719) (0.3911) (0.3252) 0.1038 -0.2142 0.5887 0.2254 0.1131 0.4923 (0.6608) (0.4523) (0.2013) (0.1296) (0.5082) (0.1260) 0.1172 0.0808 0.0839 0.0818 0.0598 0.1208 (0.2327) (0.5139) (0.6393) (0.1818) (0.4156) (0.3338)
78. Log (board size)*early -0.3254** -0.3572* -0.1813 -0.0599 -0.0410 -0.0035 (0.0252) (0.0550) (0.4872) (0.5175) (0.7205) (0.9847) 0.1107*** 0.1147*** 0.1124*** 0.0696*** 0.0694*** 0.0735*** (0.0000) (0.0000) (0.0021) (0.0000) (0.0000) (0.0038) -0.1837 -0.7373* 0.1704 -0.3792*** -0.2175 -0.3208 (0.4110) (0.0602) (0.5895) (0.0067) (0.3492) (0.1466) 0.4149 0.3053 0.3598 0.1660 0.0863 0.2983 (0.2812) (0.5115) (0.6379) (0.4898) (0.7544) (0.5759) -0.1425* -0.1883** -0.0424 -0.1012** -0.0842 -0.0579 (0.0685) (0.0424) (0.7912) (0.0382) (0.1250) (0.6046) 0.0175 0.0171 0.0271 0.0140* 0.0157 0.0052 (0.1912) (0.3001) (0.3314) (0.0944) (0.1090) (0.7887) 7254 -5161 9271** 0.6703 0.4587 9760 (0.6952) (0.4613) (0.0141) (0.8074) (0.8713) (0.4770) -0.0262 -0.0124 -0.0359 -0.0272 -0.0318 -0.0078 (0.4904) (0.7812) (0.6295) (0.2503) (0.2308) (0.8813) 0.0164 0.1115 -0.0553 0.0231 0.0094 0.0245 (0.7536) (0.1109) (0.5310) (0.4770) (0.8210) (0.6899) -0.8377*** -0.5748 -2782** -0.4133** -0.4552* -0.2498 (0.0087) (0.1448) (0.0268) (0.0374) (0.0517) (0.5309) 427 289 138 426 288 138 0.1645 0.1785 0.1523 0.1433 0.1414 0.1127 Appendix 6
79. OLS Coefficients for Pure Announcers by Change in ROS sorts OLS coefficient estimates for determinants of changes in total assets and number of employees from the year before announcement to the year of announcement for sample firms with announcement of either layoff or divestiture, but not both. Columns (1) and (2) contains firms with below sample median change in ROS in the year before the downsizing announcement, and columns (3) and (4) contain above sample median change in ROS firms. Samples and variables are described in the header to Appendix4. In Panel C, Early=1 if firm is from 2005-06 sample, otherwise Early=0. Columns (1) (3) (5) and (7) contain sample firms in 2005-06, and columns (2) (4) (6) and (8) contain sample firms in 2008-09. ***, **, and * denote significance at 1%, 5% and 10% levels, respectively.
80. Panel A: Change in Total Assets (t-1 to t+1) Change in ROS (t-1 to t) below median (no double event) Change in ROS (t-1 to t) above median (no double event) (1) (2) (3) (4) ROS 4648*** 0.0134 -0.0674 0.1476 (0.0016) (0.6471) (0.8447) (0.5482) Change in ROS (t-1 to t) -0.0009 0.0554** -0.0024 0.0025 (0.8129) (0.0438) (0.8819) (0.2414) Board Independence -0.6117* 0.2747 -0.2993 0.2923 (0.0646) (0.2674) (0.2875) (0.2405) Institutional ownership 0.3571 0.1011 0.1006 -0.0172 (0.2888) (0.6158) (0.6925) (0.9319) Market value/ Book value 0.0728 0.0185 0.1780*** 0.0814*** (0.2800) (0.6237) (0.0000) (0.0041) R&D/sales 0.3216 0.6407 0.4250 -0318*** (0.5193) (0.2835) (0.4369) (0.0011) Capex / total assets -8824 6906*** 5789 0.4032 (0.1604) (0.0040) (0.2881) (0.4208) Book leverage -0.2631 0.0161 -0.1682 -0.2045* (0.3243) (0.9001) (0.3282) (0.0675) Log (book value of assets) -0.0186 0.0342* 0.0385 0.0183 (0.6474) (0.0904) (0.2296) (0.4128) Employees / Sales 0.2551 -9014* -4211 8409*** (0.9842) (0.0938) (0.3316) (0.0058) Log (board size) 0.0185 0.1838 -0.3400* -0.0015 (0.9472) (0.1710) (0.0902) (0.9893) Manufacturing Non-High-Tech 0.0703 0.0072 0.0736 -0.0889 (0.5683) (0.9046) (0.4131) (0.1006) Manufacturing High-Tech 0.1433 0.0747 -0.0936 0.0356 (0.3255) (0.4224) (0.4961) (0.6373) Intercept 0.1433 -1325*** 0.4798 -0.4412 (0.3255) (0.0051) (0.3474) (0.2374) Number of observations 91 120 91 125 Adjusted R 2 0.1904 0.1288 0.2039 0.1911
81. Panel B: Change in Employees (t-1 to t+1) Change in ROS (t-1 to t) below median (no double event) median (no double event) (1) (2) (3) (4) ROS 0.6033*** 0.0498*** 0.1997 -0.1934 (0.0074) (0.0091) (0.4288) (0.2579) Change in ROS (t-1 to t) -0.0002 0.0033 -0.0036 0.0008 (0.9329) (0.8515) (0.7547) (0.6058) Board Independence -0.2883* -0.0682 -0.0385 -0.1066 (0.0742) (0.6676) (0.8520) (0.5366) Institutional ownership 0.2831* 0.0621 0.2675 0.0699 (0.0868) (0.6315) (0.1575) (0.6174) Market value/ Book value 0.0528 0.0185 0.0758** 0.0884*** (0.1101) (0.4475) (0.0129) (0.0000) R&D/sales 0.0689 0.2780 -0.2293 -0940*** (0.7771) (0.4681) (0.5667) (0.0000) Capex / total assets -1566* 0.2211 0.7683 0.8429** (0.0783) (0.5507) (0.4866) (0.0166) Book leverage -0.3035** -0.0743 -0.1197 -0.0613 (0.0216) (0.3689) (0.3418) (0.4271) Log (book value of assets) 0.0275 0.0314** -0.0044 0.0094 (0.1687) (0.0162) (0.8495) (0.5452) Employees / Sales 0862 -2464 -0.2527 1599 (0.6232) (0.6203) (0.9787) (0.3186) Log (board size) -0.0655 0.1028 0.2098 0.0445 (0.6318) (0.2327) (0.1814) (0.5654) Manufacturing Non-High-Tech 0.0464 -0.0247 0.0667 -0.0934** (0.4411) (0.5218) (0.3125) (0.0137) Manufacturing High-Tech 0.0093 -0.0157 0.1134 0.0617 (0.8960) (0.7927) (0.2615) (0.2413) Intercept -0.2366 -0.5867** -0.7732* -0.2765 (0.4864) (0.0231) (0.0655) (0.2859) Number of observations 91 120 91 125 Adjusted R 2 0.2387 0.1050 0.0618 0.2671
82. Change in Total Assets (t-1 to t+1) Change in Employees (t-1 to t+1) Change in ROS (t-1 to t) below median Change in ROS (t-1 to t) above median Change in ROS (t-1 to t) below median Change in ROS (t-1 to t) above median (1) (2) (3) (4) 0877* 3231* 0.4553 -0.3179 (0.0646) (0.0563) (0.2138) (0.4690) 0.0263 0.0725 0.0540*** -0.0326 (0.3944) (0.8285) (0.0055) (0.8735) 0.8218*** 0.2983 0.3491** 0.1439 (0.0013) (0.4699) (0.0279) (0.5685) 0.0504* 0.0030 -0.0022 0.0013 (0.0844) (0.2988) (0.9040) (0.4556) -0.0531* -0.0140 0.0016 -0.0073 (0.0704) (0.3800) (0.9309) (0.4579) 0.2479 0.4535 -0.0509 -0.0577 (0.3422) (0.1905) (0.7544) (0.7848) Board
83. Independence*Early -0.7843** -0.8804** -0.2287 0.0012 (0.0264) (0.0413) (0.2967) (0.9965) -0.0055 0.0067 0.0571 -0.0198 (0.9791) (0.9809) (0.6602) (0.9075) 0.4109 -0.0207 0.2282 0.2641 (0.1894) (0.9540) (0.2424) (0.2339) 0.1960 0.0477 0.0980 0.0873 (0.1343) (0.7443) (0.2294) (0.3300)
84. Log (Board Size)*Early -0.4034** -0.2276 -0.2317* 0.0734 (0.0425) (0.2930) (0.0615) (0.5944) 0.0428 0.1422* 0.0417** 0.0841*** (0.1272) (0.0000) (0.0177) (0.0000) 0.4270 -0.6908** 0.0430 -0.7952*** (0.1458) (0.0423) (0.8141) (0.0002) 0.5110 0.5691 -0.3057 0.8229** (0.2973) (0.3618) (0.3174) (0.0324) -0.1374 -0.1812 -0.1565** -0.0980 (0.1804) (0.1295) (0.0149) (0.1796) 0.0230 0.0111 0.0320*** -0.0041 (0.1663) (0.6099) (0.0022) (0.7616) -6454 4246 1834 3297 (0.5175) (0.1329) (0.7362) (0.4333) -0.0024 -0.0299 -0.0184 -0.0279 (0.9626) (0.6051) (0.5566) (0.4295) 0.0106 0.0990 -0.0170 0.0987* (0.8713) (0.2375) (0.6775) (0.0552) -0.8873** -0.7736 -0.5793** -0.2697 (0.0264) (0.1334) (0.0202) (0.3914) 211 216 211 215 0.1669 0.1727 0.1641 0.1697