Downsizing implementation and financial performance

Fernando Muñoz‐Bullon (Facultad de Ciencias Sociales y Jurídicas, Universidad Carlos III de Madrid, Madrid, Spain)
Maria J. Sanchez‐Bueno (Facultad de Ciencias Sociales y Jurídicas, Universidad Carlos III de Madrid, Madrid, Spain)

Management Decision

ISSN: 0025-1747

Publication date: 7 September 2010

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.

Keywords

Citation

Muñoz‐Bullon, F. and Sanchez‐Bueno, M. (2010), "Downsizing implementation and financial performance", Management Decision, Vol. 48 No. 8, pp. 1181-1197. https://doi.org/10.1108/00251741011076735

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

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