| Summary: | Downsizing has become a way of life as it is a common business decision, especially in times of economic contraction (Kim, 2009;
Neto and Mullet, 2018). Statistics show that during the Covid-19 pandemic, mass layoff has occurred, with 81 million jobs lost in
2020 across the Asia-Pacific region (International Labour Organization, 2020). In the US, amongst 18.1 million people who were laid
off previously, only 37 per cent could be re-employed (U.S. Bureau of Labor Statistics, 2022). Amongst other businesses, Covid-19 induced layoff occurred severely in micro and small business as they are more financially fragile (Bartik et al., 2020).
Given the undesirable impacts to the stability of economy, such as decreasing consumption and economic contraction, government in most countries initiated some measures and policies to prevent layoff (Garcia-Sanchez et al., 2021; Stenard, 2019). Despite its
prevalence, not every entrepreneur considers layoff decision as an acceptable solution in times of crisis and prefer different strategies
such as wage reduction and/or working time reduction (Neto and Mullet, 2018; Garcia-Sanchez et al., 2021; Purnomo et al., 2021).
As layoff decision is less preferred and that other options are available, it is important to understand the factors that prevent entrepreneur's decisions to engage in layoff decisions. A decision to engage in a behaviour that would potentially harm others is influenced by
their judgment whether the behaviour is acceptable or unacceptable, termed as a moral judgment (Jones, 1991; Paramita et al.,
2021). Thus, examining moral judgment on layoff decision will predict the likelihood to perform the behaviour of interest.
There are various factors that affect entrepreneur's layoff decision, such as leader's characteristics, cultural values, as well as negative emotions experienced by the leaders due to the layoff decision (Garcia-Sanchez et al., 2021; Neto and Mullet, 2018; Curtis et al.,
2017). Specifically, leaders who experience negative emotions, such as guilty, anxiety or shame, are more hesitant to be involved in
the layoff decisions (Folger and Skarlicki, 1998; Detert et al., 2008; Krishnakumar and Rymph, 2012).
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