Research On Equity Value Evaluation In Employee Stock Ownership Plan

The employee stock ownership plan(ESOP)is a system in which business owners share their corporate ownership and future income rights with their employees,originating in the United States in the 1950 s.China introduced the ESOP in the 1980 s to carry out the enterprise system reform,but it experienced three suspensions and restarts in the implementation process.The reason is that the practical experience of the ESOP is limited,and the system design is not reasonable,leading to problems such as the loss of state-owned assets,egalitarianism,and arbitrage tools.With the Third Plenary Session of the 18 th Central Committee unveiling the prelude to the reform of mixed ownership of state-owned holding companies,the economic behaviors involving state-owned property rights transactions,transfers or mergers and acquisitions have increased,and ESOP has become one of the important ways to achieve mixed ownership reform.From 2014 to 2015,the China Securities Regulatory Commission and the State-owned Assets Supervision and Administration Commission issued separate guidance on the pilot program of employee stock ownership for listed companies and state-owned holding companies,and the ESOP was revitalized again.The implementation of the ESOP is to share ownership and income rights with employees to achieve incentives.In essence,the ESOP is an equity incentive system.Under the background of mixed ownership reform,listed companies and state-owned holding companies can adopt the incremental or stock-based,and the method of determining shareholding prices varies according to the shareholding plan.Listed companies generally use secondary market repurchase or non-public issuance of shares,and the shareholding price is determined according to the transaction price of the secondary market;non-listed state-owned holding companies mostly achieve employee shareholding through capital increase and shareholding and new ways of capital contribution.This requires an assessment of the mixed-family business and the value of the shares held by the employees.Whether the secondary market transaction price or the net value of the nuclear preparation is used to determine the share price,it is necessary to objectively and fairly reflect the value of the shares held by the employee.Under the premise of ensuring that state-owned assets are not lost,the ESOP will be smoothly implemented.However,according to the guidance of the ESOP,compared with the general equity,the equity in the ESOP has a lock-up period and the liquidity is limited.The assessment of the value of this part of the equity is an assessment of the value of the restricted shares.Summarying the current status of the implementation of the ESOP in China,it is found that neither the listed company nor the non-listed state-owned enterprise considers the liquidity discount when determining the value of the shares held by the employees.In this context,starting with the definition of the role and implementation status of equity valuation in the ESOP,this paper analyzes the impact of employee shareholding ratio,lock-up period and liquidity discount on the equity value,and discusses applicability and feasibility of the Black-Scholes model(B-S model)in the evaluation of the shareholding value of the ESOP.Firstly,based on the status quo and theoretical analysis of employee shareholding plan and equity value,this paper analyzes the difference s and characteristics between employee stock ownership and common equity,and clarifies the role of equity value evaluation in it.Secondly,it explores the impact of liquidity discount on equity value,and chooses empirical analysis of the implementation of ESOP of listed companies,combing and reviewing the status quo of implementation,analyzing the effect of current equity valuation results,and discussing the valuation of employee equity.Considering the importance of liquidity discount;once again,it explores the applicability of the B-S model in the equity valuation of the ESOP and the corresponding parameter determination.Finally,it takes JLAD as an example to examine the B-S model from the perspective of practical operations.It is applied to the rationality and feasibility of the equity value evaluation in the ESOP.The results show that: first,the shares held by employees in the ESOP are limited in terms of lock-up period,shareholding ratio and source of funds compared with ordinary shares.Second,the essence of the equity valuation in the ESOP is an assessment of the value of the shares of the restricted shares.In the assessment,it should be reasonable to confirm the asset attributes,value types,and evaluation methods.Third,although the source and the pricing method of stock prices is different,the listed companies and state-owned holding companies in the process of implementing the ESOP did not consider the liquidity discount of the equity held by employees,and fails to fully reflect the value of the equity held by employees.Fourth,in order to properly consider the liquidity discount of this part of equity,it can adopt B-S model to assess the value of the shares held by employees.