Managing the “downside” of downsizing: Firms' impression offsetting around downsizing announcements

Brauer, Matthias ; Vandepoele, Louis

Document Type: Article
Year of publication Online: 2023
The title of a journal, publication series: Journal of Management Studies : JMS
Volume: tba
Issue number: tba
Page range: 1-33
Place of publication: Oxford
Publishing house: Blackwell
ISSN: 0022-2380 , 1467-6486
Publication language: English
Institution: Business School > Strategisches u. Internat. Management (Brauer 2014-)
Subject: 650 Management
Keywords (English): impression offsetting , investor response , organizational impression management , workforce downsizing
Abstract: Past studies indicate that investors perceive workforce downsizing negatively, as evidenced by negative short-term stock returns around downsizing announcements. Impression management theory suggests that downsizing firms thus attempt to offset investors’ negative impressions by issuing positive news around downsizing announcements, and that firms’ impression offsetting can attenuate investors’ negative response. In this study, we test these theoretical predictions but also unpack why and how impression offsetting positively biases investor perceptions. Prior work theorized that impression offsetting is effective because it dilutes investors’ attention and compels them to average positive and negative news items in their minds but did not clarify whether both causal mechanisms are operative, and which one is more powerful. We posit that impression offsetting influences investor response primarily by forcing them to mentally average positive and negative news. Further, our study provides a more nuanced understanding of investors’ mental averaging process. While prior work assumed that all types of positive news are received equally by investors, we argue that positive financial news offsets investors’ negative impressions more effectively than positive operational or social news. The empirical analysis of nearly 1500 downsizing announcements by the largest, public US firms between 2001 and 2020 mainly supports our theoretical reasoning.

Dieser Eintrag ist Teil der Universitätsbibliographie.

Diese Publikation ist bisher nur Online erschienen. Diese Publikation nun als "Jetzt in Print erschienen" melden.

Metadata export


+ Search Authors in

+ Page Views

Hits per month over past year

Detailed information

You have found an error? Please let us know about your desired correction here: E-Mail

Actions (login required)

Show item Show item