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2025-12-16 17:59:23
[The Curse of Layoffs: Why Cost Cuts No Longer "Save" Stock Prices?] ⑴ Goldman Sachs analyst Elsie Peng pointed out in a report released Monday that in the past, layoff announcements aimed at improving productivity or saving costs typically boosted company stock prices significantly. ⑵ However, current trends show that after such announcements, the stock performance of related companies lags behind the broader market by an average of about 2 percentage points. ⑶ Peng believes the core reason for the shift in market reaction is that investors are increasingly skeptical of the reasons given by companies for layoffs. ⑷ Investors worry that the so-called "productivity improvements" may be a cover-up for more negative operational signals such as rising interest expenses or declining profitability. ⑸ Goldman Sachs research found that companies that recently announced layoffs generally had higher growth in capital expenditures, debt, and interest expenses than comparable companies in the industry, while profit growth was lower. ⑹ Particularly noteworthy are companies that explicitly listed restructuring (including automation, AI applications, etc.) as reasons for layoffs, which experienced larger stock price declines, with an average excess return as low as -7%. (7) Although the third-quarter earnings commentary foreshadowed potential further layoffs, largely related to leveraging AI to reduce labor costs, the market did not accept this explanation. (8) Goldman Sachs' equity and credit analysts also pointed out that broader layoffs pose limited risk to the overall economy because corporate balance sheets are generally healthy and profit margins are mostly at high levels. (9) The report reveals that layoff announcements themselves are now seen by the market as a negative signal that may indicate deep-seated operational problems within companies.
