Advance notice of plant closings and firm value

Abstract

Prior to the passage of the Worker Adjustment and Retraining Notification (WARN) Act, many argued that mandating minimal advance notice given to employees would reduce managerial flexibility in closing plants, thereby reducing firm values. In addressing this issue, we use 193 closing announcements to examine the stock market's reaction to the amount of advance notice given by the firm when closing a plant. We find no relationship between the amount of advance notice provided and firm value. We also find that the majority of corporations in our sample were providing lengthy advance notice, corroborating statements in the popular press by managers who foresaw no additional burden from the passage of the WARN Act.