Executive Reduction and Employee Stock Ownership Plan

Danxun Yan ()
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Danxun Yan: Zhongnan University of Economics and Law, Department of Finance

A chapter in Proceedings of the 2022 International Conference on Economics, Smart Finance and Contemporary Trade (ESFCT 2022), 2022, pp 526-537 from Springer

Abstract: Abstract Since 2014, employee stock ownership plans have received extensive attention and support from the capital market, and the number of companies implementing the plan has gradually increased. At the same time, the changes to the company’s value that may be caused by the reduction of executives’ holdings have also become issues that need to be paid attention to. This paper uses a sample of A-share listed companies from 2014 to 2020 to sort out both the short-term and the long-term research contexts, the basic status quo of the reduction of executives’ holdings and the launch of the employee stock ownership plans in the A-share Main Board Market. Then it employed the logit regression model to examine the impact of executives’ shareholding reduction behavior on the employee stock ownership plan, and uses the event analysis method and the OLS regression model to explore the impact of the two activities on the company’s long-term and short-term value. The study concluded with three findings: First, companies whose executives have reduced their holdings have a significantly greater probability of implementing employee stock ownership plans. Second, companies that have implemented employee stock ownership plans have significantly increased their market prices in the short term. Third, long-term value is believed to be neither effected by executive reductions nor employee stock ownership plans. Finally, the idea of improving the performance of the company in the short term is put forward.

Keywords: executive reduction; employee stock ownership plan; company value (search for similar items in EconPapers)
Date: 2022
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DOI: 10.2991/978-94-6463-052-7_62

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