The Effects of Financial Conditions and Managerial Ideologies on Corporate Downsizing: Some Evidence from the U.S. Investor-Owned Electric Utilities

Abstract

Downsizing is frequently referred to as a cost reduction strategy, however reviews of the existing empirical evidence question if downsizing can actually reduce costs or contribute to long term increases in profitability and performance (Budros, 1997; Cascio, 1993). The current uncertainty about the financial consequences of downsizing suggests the need for a multivariate study to explain pervasive downsizing occurring in the 1990s. The purpose of this study is to explore the financial and ideological determinants of corporate downsizing. Relatively little research has explored the potential causes of downsizing, though several researchers have expressed concern over the lack of empirical studies investigating critical drivers of downsizing (Budros, 1997; Cameron, 1994; McKinley, Sanchez, and Schick, 1995).