COVID-19 outbreak and stock price volatility: does ESO have a moderating effect? Evidence from France

Purpose The purpose of this paper is twofold. First, it attempts to examine the impact of covid-19 outbreak on the volatility of stock prices, and then it investigates the moderating role of employee stock ownership on this relationship. Design/methodology/approach The study sample includes 108 French companies from the CAC All-Tradable index observed quarterly over a period from the first quarter of 2020 to the fourth quarter of 2022. The GMM estimator of the system in the context of dynamic panel data is used. Findings The findings show a positive impact of covid-19 pandemic on stock price volatility. Furthermore, the employee stock ownership has a negative moderating effect on the volatility-Covid-19 relationship. These results suggest that in times of crisis, investors have more confidence in companies with employee stock ownership plans than in those without. Research limitations/implications These findings have strong implications for investors and provide guidance for regulators and policymakers. Indeed, companies with greater employee stock ownership (ESO) can better withstand the volatility induced by Covid-19. This highlights the beneficial role of employee involvement in a company’s governance, providing an interesting perspective on risk management and financial stability during times of crisis such as the current pandemic. Originality/value The present study is an extension of the existing literature from two perspectives. Firstly, it examines the impact of the covid-19 pandemic on the volatility of stock prices of companies in all sectors, except the financial sector. Secondly, it aims to investigate the moderating effect of ESO on this relationship, which is the major contribution of this work. Indeed, to our knowledge, no study has examined the moderating role of ESO on Covid-volatility relationship, although such a moderating effect is theoretically presumed to exist.