BROWSE

Layoff

Definition

A layoff is the temporary suspension or permanent termination of employment of an employee or, more commonly, a group of employees for business reasons, such as personnel management or downsizing an organization. Originally, layoff referred exclusively to a temporary interruption in work, or employment but this has evolved to a permanent elimination of a position in both British and US English, requiring the addition of "temporary" to specify the original meaning of the word. A layoff is not to be confused with wrongful termination. Laid off workers or displaced workers are workers who have lost or left their jobs because their employer has closed or moved, there was insufficient work for them to do, or their position or shift was abolished. Downsizing in a company is defined to involve the reduction of employees in a workforce.

What is 'Layoff'

1. When a company eliminates jobs regardless of how good the employees' performance.

2. A risk reduction, made by investment bankers, that minimizes the potential downside associated with a commitment to purchase and sell a stock issue unsubscribed by stockholders holding rights.

Explaining 'Layoff'

1. This is usually because the company is facing financial difficulties.

2. This is a method whereby an investment banking firm, who has committed to buying up all the unsubscribed shares during a rights offering, will reduce the time risk involved due to the difference between entering into the contract and selling the shares. In other words, they are hedging against any losses due to time.


Further Reading


Layoffs, stock price, and financial condition of the firm
search.proquest.com [PDF]
… layoff; Parsons (1972) and Telser (1973) examine the factors that affect layoff rates … Closing Decisions and the Market Value of the Firm," Journal of Financial Economics, Vol … Blau, Francine D. and Lawrence M. Kahn, "Causes and Consequences of Layoffs," Economic Inquiry, Vol …

Layoff announcements and stockholder wealthLayoff announcements and stockholder wealth
journals.aom.org [PDF]
… layoff; Parsons (1972) and Telser (1973) examine the factors that affect layoff rates … Closing Decisions and the Market Value of the Firm," Journal of Financial Economics, Vol … Blau, Francine D. and Lawrence M. Kahn, "Causes and Consequences of Layoffs," Economic Inquiry, Vol …

Determinants of layoff announcements following M&As: An empirical investigationDeterminants of layoff announcements following M&As: An empirical investigation
onlinelibrary.wiley.com [PDF]
… layoff; Parsons (1972) and Telser (1973) examine the factors that affect layoff rates … Closing Decisions and the Market Value of the Firm," Journal of Financial Economics, Vol … Blau, Francine D. and Lawrence M. Kahn, "Causes and Consequences of Layoffs," Economic Inquiry, Vol …

Layoff announcements: Stock market impact and financial performanceLayoff announcements: Stock market impact and financial performance
www.jstor.org [PDF]
… layoff; Parsons (1972) and Telser (1973) examine the factors that affect layoff rates … Closing Decisions and the Market Value of the Firm," Journal of Financial Economics, Vol … Blau, Francine D. and Lawrence M. Kahn, "Causes and Consequences of Layoffs," Economic Inquiry, Vol …

Age discrimination in layoffs: Factors of injusticeAge discrimination in layoffs: Factors of injustice
link.springer.com [PDF]
… layoff; Parsons (1972) and Telser (1973) examine the factors that affect layoff rates … Closing Decisions and the Market Value of the Firm," Journal of Financial Economics, Vol … Blau, Francine D. and Lawrence M. Kahn, "Causes and Consequences of Layoffs," Economic Inquiry, Vol …

Evaluating the characteristics of corporate boards associated with layoff decisionsEvaluating the characteristics of corporate boards associated with layoff decisions
onlinelibrary.wiley.com [PDF]
… layoff; Parsons (1972) and Telser (1973) examine the factors that affect layoff rates … Closing Decisions and the Market Value of the Firm," Journal of Financial Economics, Vol … Blau, Francine D. and Lawrence M. Kahn, "Causes and Consequences of Layoffs," Economic Inquiry, Vol …

The market crash and mass layoffs: How the current economic crisis may affect retirementThe market crash and mass layoffs: How the current economic crisis may affect retirement
www.degruyter.com [PDF]
… layoff; Parsons (1972) and Telser (1973) examine the factors that affect layoff rates … Closing Decisions and the Market Value of the Firm," Journal of Financial Economics, Vol … Blau, Francine D. and Lawrence M. Kahn, "Causes and Consequences of Layoffs," Economic Inquiry, Vol …

On the estimation of stock-market reaction to corporate layoff announcementsOn the estimation of stock-market reaction to corporate layoff announcements
www.sciencedirect.com [PDF]
… layoff; Parsons (1972) and Telser (1973) examine the factors that affect layoff rates … Closing Decisions and the Market Value of the Firm," Journal of Financial Economics, Vol … Blau, Francine D. and Lawrence M. Kahn, "Causes and Consequences of Layoffs," Economic Inquiry, Vol …

Layoffs, shareholders' wealth, and corporate performanceLayoffs, shareholders' wealth, and corporate performance
www.sciencedirect.com [PDF]
… layoff; Parsons (1972) and Telser (1973) examine the factors that affect layoff rates … Closing Decisions and the Market Value of the Firm," Journal of Financial Economics, Vol … Blau, Francine D. and Lawrence M. Kahn, "Causes and Consequences of Layoffs," Economic Inquiry, Vol …

Layoffs, top executive pay, and firm performanceLayoffs, top executive pay, and firm performance
www.jstor.org [PDF]
… layoff; Parsons (1972) and Telser (1973) examine the factors that affect layoff rates … Closing Decisions and the Market Value of the Firm," Journal of Financial Economics, Vol … Blau, Francine D. and Lawrence M. Kahn, "Causes and Consequences of Layoffs," Economic Inquiry, Vol …



Q&A About Layoff


Is layoff always a risk reduction?

No, it is not always a risk reduction.

How does layoff reduce time risk?

By reducing the time between entering into contract and selling shares.

What is layoff?

When a company eliminates jobs regardless of how good the employees' performance.

What are some other ways that an investment banking firm can reduce time risk in this situation?

They could also buy up all the unsubscribed shares during the offering period or they could shorten the length of the offering period.

Why would an investment banking firm use layoff to hedge against time risk?

To minimize potential downside associated with commitment to purchase and sell stock issue unsubscribed by shareholders holding rights.