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Firms in the S&P 500 often announce layoffs within days of one another, despite the fact that the average S&P 500 constituent announces layoffs once every 5 years. By contrast, similarsized privately-held firms do not behave in this way. This paper provides empirical evidence that such clustering behavior is largely due to CEOs managing their reputation in financial markets. To interpret these results we develop a theoretical framework in which managers delay layoffs during good economic states to avoid damaging the markets perception of their ability. The model predicts clustering in the timing of layoff announcements, and illustrates a mechanism through which the cyclicality of firms layoff policies is amplified. Our findings suggest that reputation management is an important driver of layoff policies both at daily frequencies and over the business cycle, and can have significant macroeconomic consequences.

Layoff systems. --- Chief executive officers. --- CEOs (Executives) --- Executive officers, Chief --- Executives --- Employees --- Job security --- Dismissal of --- Layoff systems --- Corporations --- Chief executive officers --- Business corporations --- C corporations --- Corporations, Business --- Corporations, Public --- Limited companies --- Publicly held corporations --- Publicly traded corporations --- Public limited companies --- Stock corporations --- Subchapter C corporations --- Business enterprises --- Corporate power --- Disincorporation --- Stocks --- Trusts, Industrial --- E-books --- Finance: General --- Labor --- Macroeconomics --- Labor Turnover --- Vacancies --- Layoffs --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Information and Market Efficiency --- Event Studies --- Business Fluctuations --- Cycles --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Labor Force and Employment, Size, and Structure --- General Financial Markets: General (includes Measurement and Data) --- Labor Economics: General --- Wages, Compensation, and Labor Costs: General --- Economic growth --- Labour --- income economics --- Finance --- Business cycles --- Labor force --- Stock markets --- Wages --- Financial markets --- Labor market --- Stock exchanges --- Labor economics --- United States