Study On The Employee Stock Ownership Plan And Its Market Reaction

With the issue of the “Guidance on the Implementation of the ESOP(employee stock ownership plans)Pilot Program for Listed Companies” in June 20,2014,our country started the new exploration for the ESOPs.In order to establish and perfect the benefit sharing mechanism,arousing the enthusiasm of employees and to attract and retain employees,more and more publicly-held corporations began to adopt employee stock ownership plans.However,by reviewing and sorting out relevant literatures both at home and abroad,it is found that there are few studies on the market reaction of ESOP in China,and there are some differences between domestic and foreign research conclusions.In this context,based on the theoretical research,this paper empirically studied the impacts of the ESOPs on market-based performance.Based on the sample data from China 's A-share listed companies which have been announced to implement ESOP since the CSRC released the guidance to June 2016,this article first makes a descriptive statistical analysis on the factors of ESOPs and the characteristics of sample companies to present the situation of ESOPs implementation in China.Then we use the event research method to test whether ESOPs have significant influence on stock price.Finally,we use multivariate regression analysis to study the ESOPs elements and companies' characteristics which caused the stock price fluctuation.The results show that the ESOPs are comprehensive and diversified and the stock market has a positive response to ESOPs' announcements.And this response is more obvious in the state-owned enterprises.The cumulative abnormal return of state-owned enterprises is 6.6% higher than non-state-owned enterprises.Listed companies who carry out ESOPs with leverage in the source of funds have an excess return on shareholders of 6.5% higher than that of the ESOP shareholders who are not leveraged in the source of funds.The excess returns to companies that implement the ESOPs by means of private placement of stocks is 15% higher than those purchased stocks through the secondary market.There is a positive correlation between the ESOP shareholding ratio and the market reaction.Since the time of new exploration on ESOPs is still short in China,this paper only examines its impact on the short-term performance of enterprises to provide reasonable evidences for companies and investors decision-making.Future researches can focus on the effects of ESOPs on firms' long-term performance.