Taken as an Exploiting Tool: When ESOPs Meet Controlling Shareholders' Share Pledging in an Emerging Market
ABSTRACT We examine firms' underlying motivation for adopting an employee stock ownership plan (ESOP) in the presence of share pledging (SP) by controlling shareholders. Empirical evidence shows that an SP firm is more likely than a non‐SP firm to adopt an ESOP. Additional analysis suggests that when a firm has an ESOP (conditional on SP), its total factor productivity does not increase. Instead, it engages in more negative news hoarding than a firm without an ESOP in terms of higher stock price crash risk. Overall, our findings suggest that SP controlling shareholders exploit ESOP as a tool for seeking private benefits.
Authors
- Kam C. Chan (ORCID: https://orcid.org/0000-0003-4657-1485)
- Jigao Zhu (ORCID: https://orcid.org/0000-0001-5919-4194)
- Jie He (ORCID: https://orcid.org/0000-0002-7578-110X)
- Huili Zhang (ORCID: https://orcid.org/0000-0001-8403-4694)
Institutions
- University of International Business and Economics (CN)
- Shanghai Business School (CN)
- Zhongnan University of Economics and Law (CN)
- Beijing Normal University (CN)
Publication Details
- Journal
- European Financial Management
- Published
- 2025-05-02
- DOI
- https://doi.org/10.1111/eufm.12558
- Primary Topic
- Corporate Finance and Governance
- Type
- article
- Field-Weighted Citation Impact
- 0.00
Funders
- National Natural Science Foundation of China
- National Office for Philosophy and Social Sciences