Downsizing Implementation and Financial Performance Articles uri icon

publication date

  • August 2010

start page

  • 1181

end page

  • 1197

issue

  • 8

volume

  • 48

international standard serial number (ISSN)

  • 0025-1747

electronic international standard serial number (EISSN)

  • 1758-6070

abstract

  • Purpose: The objective of this paper is to analyze whether the way that downsizing is implemented has any impact on the firm's performance. Design/methodology/approach: The sample
    under investigation consists of a set of Spanish companies, which
    downsized between 1995 and 2001. The paper includes downsizing
    announcements and combines information from two different datasets
    (BARATZ and SABI). The focus is placed on the size of downsizing and the
    use of disengagement incentives. Findings: A negative
    relationship between the size of downsizing and post-downsizing
    corporate performance is found. In particular, firms which announced
    severe downsizing experience relatively lower performance in the year
    following the announcement. Originality/value: The
    analysis advances organizational research by reinforcing the concept
    that firm performance is not only contingent on strategies, but also
    influenced by the means through which these strategies are implemented.