We examine the effects of selected human resource management decisions on the
abnormal change in total shareholder return. Announcements of human resource decisions
are classified into five types--general HR system announcements, compensation and
benefits, staffing, shutdowns and relocations, and miscellaneous. Using an event study
methodology we investigate whether any of these HR decisions had a discernible effect on
either the level or variation of abnormal total shareholder return. We find no consistent
pattern of increased or decreased valuation in response to the different types of HR
announcements, even after controlling for the likely effect of such announcements on total
compensation costs. We do find substantially increased variation in abnormal total
shareholder return around the announcement date, which indicates that HR decisions do
provide information to the stock market. The events associated with increased variation
in total shareholder value are permanent staff reductions and shutdown/relocations. The
absence of consistent valuation effects combined with the evidence of increased variation
in shareholder value may be attributed to uncontrolled firm-specific factors, the
categorization of the HR events or, simply, to the unique interpretations the market
placed upon these events.
*Published:
Shareholder Value", ILRR, Vol. 43, no. 3 (1990): 203S-236S.
With Thomas Lemieux, published as "The Effects of Product Market Competition on Collective Bargaining Agreements: The Case of Foreign Competition in Canada", QJE (1993). Published as "The Effects of Human Resource Management Decisions on
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