ARE MARKET PERCEPTIONS OF CORPORATE LAYOFFS CHANGING

We examine the response of stock returns to corporate layoff announcements for the 12-year period from 1981 to 1992. The results indicate a dramatic shift in the investors' perception of initiatives to reduce the number of employees. While there were negative abnormal returns associated with the announcements during the recessionary and boom periods of the 1980s, there are positive abnormal returns associated with the announcements in the early 1990s. This evidence suggests that important structural changes in the U.S. labor market may be underway.