Work

Taken as an Exploiting Tool: When ESOPs Meet Controlling Shareholders' Share Pledging in an Emerging Market

Year: 2025

Type: article

Abstract: 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.

Source: European Financial Management

DOI: 10.1111/eufm.12558

Authors: Huili Zhang, Jie He, Jigao Zhu, Kam C. Chan

Institutions: Beijing Normal University, Zhongnan University of Economics and Law, University of International Business and Economics, Shanghai Business School

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: bronze

Funders: National Natural Science Foundation of China, National Office for Philosophy and Social Sciences

Awards: “模糊化”披露负面消息的非财务信息文本操纵行为及其经济后果研究 ——基于卖空机制的准自然实验, G8485671563