The Contract Design of Employee Stock Ownership Plan and Enterprise Innovation Investment: Evidence from China

Fu Cheng (), Shanshan Ji and Yucheng Chen
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Fu Cheng: School of Business Administration, Northeastern University, Shenyang 110167, China
Shanshan Ji: School of Economics and Management, Harbin Institute of Technology, Harbin 150001, China
Yucheng Chen: School of Business Administration, Northeastern University, Shenyang 110167, China

Sustainability, 2023, vol. 15, issue 3, 1-29

Abstract: Enterprise innovation is a key driver of national economic growth. How to stimulate employees’ innovation vitality to improve the company’s innovation input and output has always been a hot topic. Employee Stock Ownership Plan (ESOP) is one of the effective means to stimulate employees’ innovation vitality by linking employee wealth with firm value. The purpose of this paper is to examine the effect of ESOP implementation and contract design on enterprise innovation investment in the context of the recent booming development of ESOP in China. First, we use a treatment effect model to examine the impact of ESOP implementation on innovation investment, taking firms that implement ESOPs as the treatment group and firms that do not implement ESOPs as the control group. Second, we use multivariate regression models to test the impact of ESOP contract design (including fund source, stock source, lockup period, duration, shareholding scale, executive subscription ratio, participation degree, and management mode) on innovation investment using the treatment group. The results indicate that the implementation of ESOP is helpful in increasing enterprise innovation investment, and the impact of ESOP on innovation investment varies significantly with the design of incentive contracts.

Keywords: employee stock ownership plan; enterprise innovation; innovation investment; contract design (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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