To downsize or not to downsize: when and how does corporate downsizing create long-term value?

Purpose How does corporate downsizing contribute to a firm’s long-term value? While the extant empirical findings on this relationship are inconclusive, contradictory and equivocal, the answers to this question remain particularly important in today’s business environment. Considering that downsizing is often directed toward long-term growth and survival, this paper aims to posit that scholars should account for the temporal nature of this strategic decision to understand its economic impact on the firm’s operations. Therefore, this paper provides a more rigorous empirical examination of how a firm’s decision to downsize its workforce affects that firm’s long-term value. Design/methodology/approach This paper used Wibbens and Siggelkow’s (2020) measure of long-term investor value appropriation (LIVA) to directly observe the effects of corporate downsizing on firm long-term value and growth. Using a sample of 3,149 US publicly traded manufacturing firms that operated between 2002 to 2018, this paper tested the main effect of downsizing on LIVA and 3 boundary condition hypotheses. Findings This paper found a positive relationship between corporate downsizing and a firm’s long-term value. Interestingly, this positive relationship is stronger among firms that had high human resource slack and R&D intensity. Contrary to the expectations, this paper did not find support for the moderation effect of the proximity to bankruptcy on the relationship between corporate downsizing and a firm’s long-term value. Originality/value With these findings, the paper sheds light on the long-term implications of a firm’s decision to downsize its workforce.

Exploring Adequate Retirement Funding in South Africa: A KwaZulu-Natal Financial Planner’s View

The development of several social demographic and economic trends have created the interest among financial analysts and the general population in planning for retirement. By the year 2021 the number of South Africans past retirement age will be an estimated 4.4 million which should account for approximately 7.3% of the country’s population (currently 3.8 million or 6.8% of the population) (Statistics South Africa, 2016). The increase in South Africa’s population at large and longer retirement periods have raised questions about financial preparedness for retirement. Economic issues such as corporate downsizing, capped employer retirement contributions, changing of jobs for greater remuneration and increased daily living costs have shifted the responsibility for retirement financial well-being from employers to individuals. Adequate retirement provision does not necessarily only affect the retiree but also the family unit of the retiree as a whole, as the vast majority of households in developing countries such as South Africa rely solely on one breadwinner. A global financial planning survey “was conducted by the FPI in 2015. The survey shows that only 38% of South Africans are confident that they will achieve their financial life goals, with 55% indicating that they do not know where to start with financial planning Financial Planning Institute of South Africa (2015), Gustman et al. (1995), as sited in Greninger et al. (2000) reported that, “there is no consensus in literature regarding the definition of retirement. If we do not understand the meaning of retirement, is it possible to judge whether a population is financially prepared?” This question underlines the importance of gathering informative qualitative data such as goals and risk tolerances and quantitative data, in order to develop a capital needs analysis to establish how clients can successfully meet their retirement goals. This paper aims to explore the role of the Financial Planner in the retirement planning process.