Abstract
This paper examines the effects of employee stock ownership plans (ESOPs) on shareholder wealth. ESOPs established in the presence of takeover activity reduce share values, by approximately 4% on average. ESOPs also reduce share values if they are structured to transfer control away from outside shareholders, by creating a new ownership block with veto power over takeover bids. Large ESOPs established with nonvoting stock, so as to preclude any immediate control transfers, result in a significant increase in share values. The wealth effect of any given ESOP thus depends upon both its incentive and control effects on the corporation.
Original language | English (US) |
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Pages (from-to) | 525-555 |
Number of pages | 31 |
Journal | Journal of Financial Economics |
Volume | 27 |
Issue number | 2 |
DOIs | |
State | Published - Oct 1990 |
Externally published | Yes |
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics
- Strategy and Management