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Employee stock ownership plans and firm productivity in China

Author

Listed:
  • Haitong Li
  • Ziang Lin
  • Bo Huang

Abstract

A growing number of Chinese firms motivate their employees through employee stock ownership plans (ESOPs). Using a sample of listed firms in China, this paper examines the impact of ESOPs on firms’ total factor productivity (TFP), as well as the mechanisms of ESOPs. The empirical results show that ESOPs have a positive impact on firm TFP. The mechanism tests convey that ESOPs increase firm TFP by promoting research and development (R&D) investment and mitigating agency costs. These results are robust after accounting for endogeneity and using alternative metrics of TFP. In addition, we find that the positive effect of ESOPs on firm TFP is more pronounced in non-state-owned firms and firms with a less severe free-riding problem. Furthermore, the effect on firm TFP is positively associated with the subscription proportion of non-executive employees in ESOPs. Overall, the results of this study underscore the important role of employee ownership in firms’ productivity improvement. JEL Codes : D24, G30, J33

Suggested Citation

  • Haitong Li & Ziang Lin & Bo Huang, 2022. "Employee stock ownership plans and firm productivity in China," The Economic and Labour Relations Review, , vol. 33(4), pages 829-849, December.
    • Handle: RePEc:sae:ecolab:v:33:y:2022:i:4:p:829-849
    DOI: 10.1177/10353046221119553
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    More about this item

    Keywords

    Employee stock ownership plan; firm productivity; ownership structure; China; labour policy;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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