Do layoffs trigger ESG engagement? Exploring ESG as an organisational impression management strategy around layoff events

Details

Supervisors

Thewissen, James

Faculty

Louvain School of Management

Degree label

Master [120] : ingénieur de gestion, à finalité spécialisée

Abstract

enGuided by the concept of Organisational Impression Management (OIM) and the insurance-like function of ESG, this thesis explores the understudied relationship between layoff events and Environmental, Social, and Governance (ESG) engagement. Using a panel event study, it examines fluctuations in ESG scores, used as a proxy for ESG engagement, around layoff announcements among U.S.-based companies from 2010 to 2023. The research design compares firms that announced layoffs (the treated group) with a propensity score-matched control group. The findings reveal a subtle, but significant increase in ESG scores among firms that conducted layoffs, compared to the control group. The increase begins one year before the event, rises further during the layoff year, and reaches its peak in the year following, before stabilising. These observations suggest that treated firms engage in both anticipatory and reactive ESG efforts around layoff periods. However, the severity of layoffs does not appear to systematically influence the intensity of this ESG response. Hence, the results provide evidence that firms may strategically use ESG initiatives to mitigate reputational damage associated with workforce reductions. By presenting novel evidence of the leverage of ESG during sensitive corporate events, this research contributes to the literature on Organisational Impression Management. In addition, this work also introduces a straightforward and replicable framework for analysing shifts in ESG behaviour related to major corporate events.