The Implications of Magnitude, Timing, and Realization of Workforce Downsizing on Firm Profitability

Few empirical studies have focused on the internal characteristics of the downsizing process that influence the relationship between workforce downsizing and organizational performance. Our study addresses this gap by analyzing the effects of magnitude, timing, & realization of workforce downsizing on downsizing firms' subsequent financial performance. Based on an analysis of the workforce downsizing actions by the largest European firms (Eurostoxx 50/Stoxx50) between 1996 to 2006, we find that the relationship between the magnitude of workforce downsizing and subsequent firm profitability is non-linear.