The 1997 Asian Economic Crisis has brought on a tremendous wave of retrenchment in many companies in Asia. We wonder, whether retrenchment is truly the cure for the Asian companies facing deteriorating financial performance during the crisis period. Thus our research primarily seeks to study the relationship between changes in the number of employees and companies` financial performance during the Asian Economic Crisis. To examine this relationship, an econometric analysis is conducted using data of companies listed in Asia week 1000. The results of this study indicate that in most cases, a change in the number of employees is not a significant explanatory factor for companies` financial performance. Hence, management should seriously consider all the costs of retrenchment before carrying out retrenchment.