The Effects of Human Resource Management Decisions on Shareholder Value

John M. Abowd, George T. Milkovich, John M. Hannon

NBER Working Paper No. 3148
Issued in October 1989
NBER Program(s):Labor Studies Program

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.

download in pdf format
   (600 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w3148

Published: John M. Abowd & George T. Milkovich & John M. Hannon, 1990. "The Effects of Human Resource Management Decisions on Shareholder Value," ILR Review, Cornell University, ILR School, vol. 43(3), pages 203-2-236-, April. citation courtesy of

Users who downloaded this paper also downloaded* these:
Farber and Hallock w7295 Have Employment Reductions Become Good News for Shareholders? The Effect of Job Loss Announcements on Stock Prices, 1970-97
Bloom and Van Reenen w16019 Human Resource Management and Productivity
Carvalho, Calomiris, and Amaro de Matos w11350 Venture Capital as Human Resource Management
Lang, Poulsen, and Stulz w4654 Asset Sales, Firm Performance, and the Agency Costs of Managerial Discretion
Ichniowski, Shaw, and Prennushi w5333 The Effects of Human Resource Management Practices on Productivity
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us