Family firms and layoff announcements – Media perceptions, the use of language, and performance effects

• Applicant: Professorin Dr. Miriam Zschoche
• Subject Area: Accounting and Finance
• Term: since 2022
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 493010778

Family firms dominate economic activity around the world being significantly different from other companies in their structural characteristics and their strategic decision-making. There is extensive literature that highlights that family-owned firms typically enjoy a higher reputation compared to firms with other ownership structures. However, there is very limited knowledge on how this reputation bonus translates into the media perception of strategic decisions’ announcements. The interplay of communicating a strategic decision and the associated media reactions are particularly interesting when firms publicize critical decisions. ‘Bad news’, which might have their strongest amplitude when announcing large-scale layoffs, are expected to create strong and divers reactions. Hence, the goal of this project is to analyze the interplay of the announcement of such downsizing decisions and the associated media reactions, explicitly distinguishing between family firms and non-family firms. In particular, we want to answer the following three questions: Does the media react less negatively toward downsizing announcements when family firms make them? Do family firms communicate downsizing decisions differently from non-family firms? What are the performance consequences of associated media reactions? In order to deliver a theoretical explanation for the reputation and communication of family firms and the media response to a downsizing announcement, we use a behavioral, in particular, a socio-cognitive, perspective. This approach is particularly suitable to answer the questions because reputation and corporate communication, including its perception by media agents, are rather a black box, which is difficult to open by traditional, efficiency-oriented, strategic management concepts. Empirically, we want to construct a panel of all downsizing announcements (affecting a minimum of 100 employees) of firms based in the DACH region (Germany, Austria, and Switzerland) within a 15-year time period (2005–2020). A preliminary screening led to about one thousand downsizing announcements within this period, about a quarter of them from family firms. We will use content analyses to specify the wording of downsizing announcements as well as the associated media reactions. The results of this project are expected to deliver valuable insights for research as well as management practice, as it will be the first systematic analysis on how the media response differs between the announcements of strategic decisions of family firms and non-family firms. The extensive analysis of the difference in the communication strategies used by family (and non-family) firms and their performance consequences enhance our knowledge on the inherent specifics of family-owned firms and their perception in the public.

• DFG Programme: Research Grants