Workforce Shocks and Financial Markets: Asset Pricing Perspectives

Workforce adjustments, such as mass layoffs, are significant corporate events that can influence stock returns and volatility, yet their broader asset-pricing implications remain underexplored. We examine the impact of such workforce shocks on stock performance from an asset-pricing perspective. Grounded in production-based asset-pricing theory, incorporating labor adjustment costs and search-and-matching frictions, our study posits that disruptions in the labor force significantly affect firm risk and value. This focus addresses a clear gap. Previous research has not comprehensively evaluated workforce shocks as systematic risk factors in a cross-sectional asset-pricing model. Using an extensive dataset spanning 1990–2023 and covering thousands of layoff events, we construct a novel “workforce shock” factor and conduct the first large-scale empirical tests of its pricing relevance. Our analysis reveals that workforce shocks lead to lower stock returns and heightened volatility, effects especially pronounced in labor-intensive firms. Moreover, exposure to workforce shock risk carries a significant premium, indicating that these disruptions act as a systematic risk factor priced in the cross-section of equity returns. Overall, our study provides the first comprehensive evidence linking labor force disturbances to equity risk premia, underscoring the importance of incorporating labor market considerations into asset-pricing models.

Authors

Institutions

Publication Details

Journal
International Journal of Financial Studies
Published
2026-01-06
DOI
https://doi.org/10.3390/ijfs14010012
Primary Topic
Organizational Downsizing and Restructuring
Type
article
Field-Weighted Citation Impact
0.00
Controls
|||
ALL TIME
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
article

Workforce Shocks and Financial Markets: Asset Pricing Perspectives

Samreen Akhtar, Refia Wiquar, Alam Ahmad, Mohd Shahid Ali et al.
International Journal of Financial Studies
Organizational Downsizing and Restructuring
article

Workforce Shocks and Financial Markets: Asset Pricing Perspectives

Samreen Akhtar, Refia Wiquar, Alam Ahmad, Mohd Shahid Ali, Jyoti Agarwal
article en

Abstract

Workforce adjustments, such as mass layoffs, are significant corporate events that can influence stock returns and volatility, yet their broader asset-pricing implications remain underexplored. We examine the impact of such workforce shocks on stock performance from an asset-pricing perspective. Grounded in production-based asset-pricing theory, incorporating labor adjustment costs and search-and-matching frictions, our study posits that disruptions in the labor force significantly affect firm risk and value. This focus addresses a clear gap. Previous research has not comprehensively evaluated workforce shocks as systematic risk factors in a cross-sectional asset-pricing model. Using an extensive dataset spanning 1990–2023 and covering thousands of layoff events, we construct a novel “workforce shock” factor and conduct the first large-scale empirical tests of its pricing relevance. Our analysis reveals that workforce shocks lead to lower stock returns and heightened volatility, effects especially pronounced in labor-intensive firms. Moreover, exposure to workforce shock risk carries a significant premium, indicating that these disruptions act as a systematic risk factor priced in the cross-section of equity returns. Overall, our study provides the first comprehensive evidence linking labor force disturbances to equity risk premia, underscoring the importance of incorporating labor market considerations into asset-pricing models.

International Journal of Financial StudiesVol. 14(1)
Saudi Electronic University (SA), Shree Guru Gobind Singh Tricentenary University (IN), University of Jeddah (SA), Dammam Central Hospital (SA), Sharda University (IN)
Decent work and economic growth
Openalex Percentile: Top 95%
Organizational Downsizing and Restructuring
AI Navigator

Ask Laika to Summarize, Analyze, and Connect papers live on the map.

Summarize Papers & Methodologies

Extract key findings, datasets, and comparative methods across publications.

Benchmark Rankings & Visual Analytics

Rank top research institutions, authors, funders, topics, and journals by Field-Weighted Citation Impact (FWCI) and paper volume with instant charts.

Connect Distant Disciplines

Bridge topological clusters on the map to find hidden collaborative intersections.