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Do managers reduce reported earnings before a workforce reduction announcement? Evidence from French listed firms
[Les dirigeants gèrent-ils les résultats comptables avant d’annoncer une réduction d’effectifs ? Le cas des entreprises françaises cotées]

Author

Listed:
  • Marie-Anne Verdier

    (LGCO - Laboratoire Gouvernance et Contrôle Organisationnel - UT3 - Université Toulouse III - Paul Sabatier - UT - Université de Toulouse)

  • Jennifer Boutant

    (CRM - Centre de Recherche en Management - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - IAE - Institut d'Administration des Entreprises - Toulouse - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper examines whether firms engage in earnings management activities in the context of workforce reductions. We assume that firms use income-decreasing accruals before workforce reduction announcements to show that the operation is necessary and thus to avoid incurring political costs. Based on 120 workforce reduction announcements for 104 French listed companies over the period 2007-2012, our results confirm that firms manage earnings downwards in the year before workforce reduction announcements (approximately 4% of total assets). Overall, the results validate the political cost hypothesis in the context of workforce reductions.

Suggested Citation

  • Marie-Anne Verdier & Jennifer Boutant, 2016. "Do managers reduce reported earnings before a workforce reduction announcement? Evidence from French listed firms [Les dirigeants gèrent-ils les résultats comptables avant d’annoncer une réduction ," Post-Print halshs-01522595, HAL.
    • Handle: RePEc:hal:journl:halshs-01522595
    DOI: 10.3917/cca.223.0009
    as

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    Cited by:

    1. Godowski, Christophe & Nègre, Emmanuelle & Verdier, Marie-Anne, 2020. "Toward dialogic accounting? Public accountants’ assistance to works councils − A tool between hope and illusion," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 69(C).
    2. Verdier, Marie-Anne & Boutant Lapeyre, Jennifer, 2023. "The myth of workforce reduction efficiency: The performativity of accounting language," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 90(C).

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