The effect of employee stock ownership plans on enhancing corporate innovation

Xiaohan Sun, Yongyu Lu and Shan Tian

Finance Research Letters, 2025, vol. 79, issue C

Abstract: This study investigates the impact of employee stock ownership plans (ESOPs) on corporate innovation performance in China using a sample of A-share listed companies that implemented ESOPs from 2015 to 2022. The findings indicate that ESOPs significantly enhance corporate innovation performance. This positive effect is due to reduced agency costs and narrowed pay gaps. The study proposes and tests three hypotheses to explore the mechanisms underlying the relationship between ESOPs and innovation performance. The empirical results confirm that ESOPs foster shared ownership, align interests with corporate goals, and promote collaboration and innovation.

Keywords: Employee stock ownership plan; Corporate innovation; Agency cost; Pay gap (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:79:y:2025:i:c:s1544612325004969

DOI: 10.1016/j.frl.2025.107233

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