Downsizing, Truth-Telling and Mimicking Behaviour

Journal of Law and Financial Management, Vol. 9, No. 1, pp. 28-47, June 2010

25 Pages Posted: 13 Feb 2011 Last revised: 27 Feb 2011

See all articles by Brett A. King

Brett A. King

University of North Alabama - College of Business - Department of Economics and Finance

Carolyn Carroll

affiliation not provided to SSRN

Date Written: June 10, 2010

Abstract

This paper addresses an ethical question: when there is little to lose, do corporate managers misrepresent the facts? The situation that we examine where truth-telling has minimal consequences is a firm's reason for eliminating employees. The consequence for misrepresenting the true reason is damage to the firm's reputation, but this impairment may be inconsequential. In general, our evidence is consistent with many firms telling the truth. However, for some firms, we find that managers apparently tell the truth, but perhaps not the whole truth. And for other companies, the evidence suggests 'mimicking' behavior. Some firms may try to mimic other firms - the ones in better financial condition - by giving the same reason for downsizing. In this sense these firms may be misrepresenting the truth.

Keywords: Finance, Law

JEL Classification: M40, M41

Suggested Citation

King, Brett A. and Carroll, Carolyn A., Downsizing, Truth-Telling and Mimicking Behaviour (June 10, 2010). Journal of Law and Financial Management, Vol. 9, No. 1, pp. 28-47, June 2010, Available at SSRN: https://ssrn.com/abstract=1759225

Brett A. King (Contact Author)

University of North Alabama - College of Business - Department of Economics and Finance ( email )

Florence, AL 35632
United States

Carolyn A. Carroll

affiliation not provided to SSRN

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