Industrial and Corporate Change vol:24 issue:6 pages:1443-1472
This paper uses a unique dataset to study the short term effects of downsizing on operational and financial performance of large German firms. In general, productivity and profitability after downsizing are – at the best – comparable to their pre-downsizing levels. During the downsizing event, the performance even drops. Moreover we make a distinction between firms downsizing because of a business downturn and firms downsizing to increase efficiency. Especially downsizing for the latter firms appears to be unsuccessful.