Employee stock ownership plan and stock price crash risk

Yan Li (), Bao Sun () and Shangyao Yu ()
Additional contact information
Yan Li: Renmin University of China
Bao Sun: Renmin University of China
Shangyao Yu: Beijing Technology and Business University

Frontiers of Business Research in China, 2019, vol. 13, issue 1, 1-33

Abstract: Abstract This paper examines whether the announcement of an employee stock ownership plan (ESOP) affects stock price crash risk and the mechanism by which the ESOP may influence crash risk, using a sample of Chinese A-share firms from the period 2014 to 2017. We provide evidence that an ESOP announcement is significantly and negatively related to a firm’s stock price crash risk. An ESOP announcement sends positive signals to the market that insiders are optimistic about a firm’s future value, which helps enhance investor confidence, resist the pressure for a fire sale caused by negative information disclosure, and reduce stock price crash risk. Further research shows that larger-scale, lower-priced and non-leveraged ESOPs are more helpful in reducing crash risk. This paper sheds lights on the impact of ESOPs in a volatile market environment. It also contributes to firms’ implementation of ESOPs and the development of the legal system in capital markets.

Keywords: Employee stock ownership plan (ESOP); Crash risk; Market situation; Signaling effect; Leveraged ESOP; China (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://link.springer.com/10.1186/s11782-019-0061-2 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:fobric:v:13:y:2019:i:1:d:10.1186_s11782-019-0061-2

Ordering information: This journal article can be ordered from
https://fbr.springeropen.com/

DOI: 10.1186/s11782-019-0061-2

Access Statistics for this article

Frontiers of Business Research in China is currently edited by Jiye Mao, Ziliang Deng and Steven Shuye Wang

More articles in Frontiers of Business Research in China from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().