Many managers describe layoffs as the hardest and most painful decisions of their careers; yet,
standard economic models treat human and physical capital adjustments alike. We collect novel
data on layoffs by U.S. public firms using NLP techniques, which allows us to establish several
facts that are jointly hard to reconcile with existing models. First, firing decisions have large
adverse healthof effects on CEOs, with distress-induced layoffs estimated to reduce CEO lifespan
by 1.85 years. Second, CEOs become more reluctant to make layoffs over their tenure as they
form more connections inside the firm. After plausibly-exogenous CEO changes, instead, new
CEOs make more and shareholder value-increasing layoff decisions. Third, CEOs’ increasing
reluctance to lay off employees intensifies when layoffs are more painful for employees, such as
during recessions or the holiday season, or more painful for managers to witness, such as when
they affect socially or geographically close employees. Fourth, the documented layoff reluctance is
substantially more pronounced among CEOs with higher empathy-related traits. We also show
that long-tenured CEOs are more likely to cut R&D spending during recessions, offsetting forgone
savings from layoffs. Our results imply the need to adjust models of managerial decision-making
for a “human” component of layoff avoidance. Prosocial, or empathy-related, motives provide a
unifying explanation.
Date
16.9.2025
, 1.00 until 2.30 p.m.
Speaker
Prof Ulrike Malmendier, University of California, Berkeley
Ulrike Malmendier ist Cora Jane Flood Professor of Finance an der University of California in Berkeley, Professor of Economics am Department of Economics und Professor of Finance an der Haas School of Business. Sie ist seit September 2022 Mitglied des Sachverständigenrates Wirtschaft.
Venue
Institute for Employment Research
Regensburger Straße 104
90478 Nürnberg
Room Re100 E10
or online via MS Teams
Registration
Researchers who like to participate, please register via eveeno