Resizing The Organization 17. This book seeks to provide executives with useful insights, tools, guidelines, principles, and lessons learned about organizational transition and change. | Financial Consequences of Employment Change Decisions 141 Number of employees EMP Operating income before depreciation interest and taxes OIBDP Plant and equipment PPENT Total assets AT Dividends on common stock DVPSX Price of common stock end-of-year close PRCC For each event-year in the study period 1983 through 1998 we calculated the change in employment as the ratio REMP0 EMP0 EMP-1 where the subscripts denote the year with the event year being 0 and -1 the prior year. The subscripts 1 and 2 denote the first and second years following the year of the employmentchange event. If employment data were unavailable for the year of analysis and the prior year we excluded the company from the sample for that year. In addition we calculated the change in plant and equipment as the ratio RPENT PPENT0 PPENT -1 to measure the extent to which capital assets were acquired or divested in the event year. To measure the improvement or decline in profitability we calculated differences in ROA from the base period t -1 to periods t 0 1 and 2 as AROAt OIBDPt ATt - OIBDP-1 AT-1 The return to the stockholders surrounding the change in employment was equal to the dividend yield plus price appreciation in each one-year period ending in time periods 0 1 and 2 Stock return PRCCt - PRCCt-1 DVTSXt PRCC We used industry-aggregate variables to generate industry-adjusted measures for the performance ratio by subtracting the corresponding industry ratio from the company ratio. As with the direct measures of company performance we calculated the industry performance-change measures relative to the performance in time period -1. For performance measures relative to the industry the empirical question is Are companies doing any better or worse relative to their industries than they were in time period 142 Resizing the Organization -1 With respect to the stock return by subtracting the industryaverage stock return we are implicitly factoring out the return on stocks with the same level of .
