Intra‐industry effects of bank layoff announcements

Abstract

Abstract Bank layoffs have increased in recent years as a means of reducing operating expenses. To the extent that bank layoffs signal information about other banks, intra‐industry effects should occur. Our objective is to determine whether intra‐industry effects exist, and to explain the variation in intra‐industry effects following bank layoff announcements. Our analysis shows positive and significant intra‐industry effects, which are interpreted as negative information for the announcing bank, as competitors may be able to gain market share. The intra‐industry effects are more favorable when the banks announcing layoffs are in the same region as rival banks, and when banking industry earnings are relatively high.