In the past, company share prices typically responded very positively to announcements regarding job layoffs if they were motivated by productivity gains or cost savings. Now though, corporates have underperformed the overall market by 2% after making such disclosures.
The trend of late, Goldman finds, has been for companies to attribute job cuts to generally benign initiatives to restructure, driven by automation and technological improvements. But while these shares have lagged the market by 2%, those companies cutting workers and explicitly telling investors that a restructuring is the reason have suffered even more pronounced falls. These average excess returns are minus 7%.
lol, cutting labor is at BEST, and only narrowly in a shareholder perspective, a very short term effort to boost profits / stack some capital to rebalance.
in a microeconomic perspective, it’s absurd that it would ever come with an investment bump, because it’s a signal of something gone wrong, organizationally, and ownership is pushing management to strip out some copper wiring to raise a few bucks for whatever the short term problem is that was so shaky ownership wouldn’t approve a loan/corporate bond, or some kind of ownership stock offering/investment.
in fact, it’s dumber than copper stripping, because you lose institutional knowledge in layoffs. copper can be reinstalled, but losing the wrong people is not an really fixable, even when it’s time to hire again. it takes significant time and luck to develop people just to get back to where one was.
i am continually surprised at how stupid the logic of capital is at organizational management. like we all know its fundamentally there to extract value from the organization it enters, but it’s too myopic to even do that in a stable, intentional way. it’s always chasing and inflating blips hoping to be an early investor to the next mass hysteria bubble that they expect to knowingly exit before it turns to shit.
They pretended the cuts were due to AI productivity gains.
Yeah, the charade stopped working when productivity numbers kept showing declines despite AI’s supposed “productivity gains”.
The western mind cannot comprehend long-term planning.
Long term planning is woke communism
I remember talking to a manager that was leaving after the layoffs and he was telling me he kept a few people on who didn’t do shit just incase there was another round of layoffs
short term
companies only think in short term cause the CEO of most companies will be gone before it matters to them, and they get a nice bonus for doing…something.
sure but, shareholders/investors buying stock in response to layoffs is chasing an ephemeral bump? investors should have some interest in a longer game, unless everybody has finally transitioned to day trading.
Just doing it for the love of the game now
