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How current “big tech announcements” affect companies and their stock prices

February 23, 2023 Ann-Christine Schulz – Strategy Coordinator and Project Leader at the Institute for Digital Transformation and Strategy (IDS) at FHWien der WKW – was interviewed this week by the Wall Street Journal about her publication on stock market reactions to mass layoffs.

The Wall Street Journal article (paywall) and video (available for free) explore the question of why big layoff announcements don’t always translate into big workforce cuts. For example, Dropbox announced it would cut 11% of its workforce, but the company only shrank by three percent. Since big job cuts not only make headlines, but also affect stock prices, Ann-Christine Schulz was asked for her take on the current situation.

As efficiency drives and downsizing gained popularity as management tools in the 1990s, the stock market discount for layoffs shrank and even turned into its opposite, according to Ann-Christine Schulz. There are parallels to the current situation, where companies are grappling with how to deal with inflation and the risk of recession, she added. ” When layoffs are perceived by investors as reasonable cost-cutting measures, the market response may be less negative or even positive.”