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The Effect of Layoffs on Firm Reputation

David J. Flanagan

Haworth College of Business, Western Michigan University, Kalamazoo MI 49008-3806, David.Flanagan{at}wmich.edu

K. C. O’Shaughnessy

Haworth College of Business, Western Michigan University, Kalamazoo MI 49008-3806

A firm’s reputation is perhaps one of its most important strategic resources. Using data from Fortune’s America’s Most Admired Companies survey, this article examines how layoffs affect the reputations of firms. The authors found that layoffs have a negative impact on a firm’s reputation and that this relationship is significantly stronger for newer firms than older firms. Limited support is found for the hypothesis that larger firms’ reputations will be buffered from the adverse effects of a layoff on their reputations. Implications of this research and future research questions are discussed.

Key Words: corporate reputation • layoffs • attribution • performance

Journal of Management, Vol. 31, No. 3, 445-463 (2005)
DOI: 10.1177/0149206304272186
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