Companies to experience significant stock price changes in reaction to announcements
In recent years, it has been common for companies to experience significant stock price changes in reaction to announcements of massive layoffs. Critics charge that such events encourage to fire longtime employees and that Wall Street is cheering them on. Do you agree or disagree?
Sample Answer
The relationship between stock prices and announcements of massive layoffs is a complex one. There is no single answer to the question of whether stock prices tend to go up or down in response to such announcements.
Some studies have found that stock prices typically increase in the short-term after companies announce layoffs. For example, a 2012 study by the University of Chicago found that the average stock price of companies that announced layoffs increased by 2.7% in the week following the announcement. However, the study also found that these gains were often short-lived, and that stock prices typically returned to their pre-announcement levels within a few months.