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Downsizing and firm performance: evidence from German firm data

Author

Listed:
  • Tim Goesaert
  • Matthias Heinz
  • Stijn Vanormelingen

Abstract

This article uses a unique data set to study the short-term effects of downsizing on operational and financial performance of large German firms. In general, productivity and profitability after downsizing are—at the best—comparable to their pre-downsizing levels. During the downsizing event, the performance even drops. Moreover, we make a distinction between firms downsizing because of a business downturn and firms downsizing to increase efficiency. Especially downsizing for the latter firms appears to be unsuccessful.

Suggested Citation

  • Tim Goesaert & Matthias Heinz & Stijn Vanormelingen, 2015. "Downsizing and firm performance: evidence from German firm data," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 24(6), pages 1443-1472.
    • Handle: RePEc:oup:indcch:v:24:y:2015:i:6:p:1443-1472.
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    File URL: http://hdl.handle.net/10.1093/icc/dtv007
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    Citations

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    Cited by:

    1. Matthias Fahn & Nicolas Klein, 2019. "Relational Contracts with Private Information on the Future Value of the Relationship: The Upside of Implicit Downsizing Costs," American Economic Journal: Microeconomics, American Economic Association, vol. 11(4), pages 33-58, November.
    2. Shahram Ali Kazho & Tarik Atan, 2022. "Public Sector Downsizing and Public Sector Performance: Findings from a Content Analysis," Sustainability, MDPI, vol. 14(5), pages 1-21, March.
    3. Andrea Bassanini & Eve Caroli & Kevin Geay & Antoine Reberioux, 2024. "Heavy is the crown: CEOs’ social interactions and layoff decisions," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 33(5), pages 1253-1270.
    4. Boumediene Ramdani & Cherif Guermat & Kamel Mellahi, 2021. "The effect of downsizing on innovation outputs: The role of resource slack and constraints," Australian Journal of Management, Australian School of Business, vol. 46(2), pages 346-365, May.
    5. Newman - Wadesango & Gwangwadza D.C. & Charity Mhaka & Ongayi Wadesango, 2018. "Labour Force Reduction’s Influence on Financial Performance of Manufacturing Companies: A Case Study of Playtime Manufacturers (2011 – 2016)," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 14(5), pages 48-72, OCTOBER.
    6. Zorn, Michelle L. & Norman, Patricia M. & Butler, Frank C. & Bhussar, Manjot S., 2017. "Cure or curse: Does downsizing increase the likelihood of bankruptcy?," Journal of Business Research, Elsevier, vol. 76(C), pages 24-33.
    7. Silviano Esteve-Pérez & Fabio Pieri & Diego Rodriguez, 2021. "Coping with high decline: firms’ resilience to adversity," DEM Working Papers 2021/08, Department of Economics and Management.
    8. Kao, Chun-Lin & Chen, Ming-Yuan, 2020. "Employee downsizing, financial constraints, and production efficiency of firms," International Review of Economics & Finance, Elsevier, vol. 68(C), pages 59-73.
    9. D Reshma & Sudharani R & Suresh N, 2022. "A Study on Impact of Downsizing on Profitability of Construction Industries listed in Bombay Stock Exchange (BSE) India," Papers 2207.11546, arXiv.org.
    10. P. Michael KOSICEK & Ramesh SONI & David YERGER, 2023. "The Distribution of Relative Demand and Relative Supply Shocks for Managers Across the U.S. Economy," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 5-13.
    11. Fahn, Matthias & Klein, Nicolas, 2018. "Relational Contracts with Private Information On the Future Value of the Relationship," Rationality and Competition Discussion Paper Series 106, CRC TRR 190 Rationality and Competition.
    12. Wadesango N & Gwangwadza D C & Mhaka C & Wadesango V O, 2018. "The Impact of Labour Force Reduction on the Financial Performance of Manufacturing Companies," Journal of Economics and Behavioral Studies, AMH International, vol. 10(2), pages 20-32.

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