IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v78y2023icp859-872.html
   My bibliography  Save this article

Confucianism and employee stock ownership plans: Evidence from Chinese listed firms

Author

Listed:
  • Xu, Xixiong
  • Duan, Lingling

Abstract

We investigate whether Confucian culture affects the adoption of employee stock ownership plans (ESOPs). Using data from a sample of Chinese A-share listed firms between 2014 and 2020, we find that Confucianism promotes firms to adopt ESOPs. This effect is concentrated in firms with high human capital intensity, intense industry competition, and less foreign culture influence. Further analysis reveals that stronger Confucian influence leads to longer lock-up periods, more employees holding, larger actual fund size, and more shares per employee for ESOPs. Finally, we suggest that by trigging ESOPs, Confucianism enhances firm value. This study highlights the importance of culture for employee incentives and extends our understanding of ESOP determinants.

Suggested Citation

  • Xu, Xixiong & Duan, Lingling, 2023. "Confucianism and employee stock ownership plans: Evidence from Chinese listed firms," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 859-872.
    • Handle: RePEc:eee:ecanpo:v:78:y:2023:i:c:p:859-872
    DOI: 10.1016/j.eap.2023.04.035
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S031359262300084X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eap.2023.04.035?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cosset, Jean-Claude & Somé, Hyacinthe Y. & Valéry, Pascale, 2016. "Does Competition Matter for Corporate Governance? The Role of Country Characteristics," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 51(4), pages 1231-1267, August.
    2. Yael V. Hochberg & Laura Lindsey, 2010. "Incentives, Targeting, and Firm Performance: An Analysis of Non-executive Stock Options," Review of Financial Studies, Society for Financial Studies, vol. 23(11), pages 4148-4186, November.
    3. Chen, Shihua & Ye, Yan & Jia, Fei & Wang, Chengqi, 2022. "Accounting for the role of culture in board directors’ dissent," Research in International Business and Finance, Elsevier, vol. 61(C).
    4. Seung Ho Park & Yadong Luo, 2001. "Guanxi and organizational dynamics: organizational networking in Chinese firms," Strategic Management Journal, Wiley Blackwell, vol. 22(5), pages 455-477, May.
    5. Feng, Yumei & Yu, Qiang & Nan, Xingheng & Cai, Yongbin, 2022. "Can employee stock ownership plans reduce corporate financialization? Evidence from China," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 140-151.
    6. Rauh, Joshua D., 2006. "Own company stock in defined contribution pension plans: A takeover defense?," Journal of Financial Economics, Elsevier, vol. 81(2), pages 379-410, August.
    7. Sun, Yang & Garrett, Tony C. & Kim, Kyung Hoon, 2016. "Do Confucian principles enhance sustainable marketing and customer equity?," Journal of Business Research, Elsevier, vol. 69(9), pages 3772-3779.
    8. Xingqiang Du, 2016. "Does Confucianism Reduce Board Gender Diversity? Firm-Level Evidence from China," Journal of Business Ethics, Springer, vol. 136(2), pages 399-436, June.
    9. Po Ip, 2009. "Is Confucianism Good for Business Ethics in China?," Journal of Business Ethics, Springer, vol. 88(3), pages 463-476, September.
    10. Xixiong Xu & Wanli Li & Xichan Chen, 2019. "Confucian culture and stock price crash risk," China Journal of Accounting Studies, Taylor & Francis Journals, vol. 7(1), pages 25-61, January.
    11. Wang, Li & Dai, Yunhao & Kong, Dongmin, 2021. "Air pollution and employee treatment," Journal of Corporate Finance, Elsevier, vol. 70(C).
    12. Cocco, João F. & Volpin, Paolo F., 2013. "Corporate Pension Plans as Takeover Deterrents," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 48(4), pages 1119-1144, August.
    13. Andrea L. Eisfeldt & Dimitris Papanikolaou, 2013. "Organization Capital and the Cross-Section of Expected Returns," Journal of Finance, American Finance Association, vol. 68(4), pages 1365-1406, August.
    14. Liu Yang & Wanli Li & Jiaming Li, 2022. "Confucianism and Earnings Management: Evidence from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(6), pages 1525-1536, May.
    15. Chang, Xin & Fu, Kangkang & Low, Angie & Zhang, Wenrui, 2015. "Non-executive employee stock options and corporate innovation," Journal of Financial Economics, Elsevier, vol. 115(1), pages 168-188.
    16. Huei-Ting Tsai & Chung-Lin Tsai, 2022. "The influence of the five cardinal values of confucianism on firm performance," Review of Managerial Science, Springer, vol. 16(2), pages 429-458, February.
    17. William N. Pugh & Sharon L. Oswald & John S. Jahera Jr., 2000. "The effect of ESOP adoptions on corporate performance: are there really performance changes?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 21(5), pages 167-180.
    18. Yan, Youliang & Xu, Xixiong & Lai, Jieji, 2021. "Does Confucian culture influence corporate R&D investment? Evidence from Chinese private firms," Finance Research Letters, Elsevier, vol. 40(C).
    19. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    20. Ilona Babenko & Yuri Tserlukevich, 2009. "Analyzing the Tax Benefits from Employee Stock Options," Journal of Finance, American Finance Association, vol. 64(4), pages 1797-1825, August.
    21. Lee, Chien-Chiang & Wang, Chih-Wei & Ho, Shan-Ju, 2022. "The dimension of green economy: Culture viewpoint," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 122-138.
    22. Xingqiang Du, 2015. "Does Confucianism Reduce Minority Shareholder Expropriation? Evidence from China," Journal of Business Ethics, Springer, vol. 132(4), pages 661-716, December.
    23. Guangyong Lei & Wanwan Wang & Junli Yu & Kam C. Chan, 2022. "Cultural Diversity and Corporate Tax Avoidance: Evidence from Chinese Private Enterprises," Journal of Business Ethics, Springer, vol. 176(2), pages 357-379, March.
    24. E. Han Kim & Paige Ouimet, 2014. "Broad-Based Employee Stock Ownership: Motives and Outcomes," Journal of Finance, American Finance Association, vol. 69(3), pages 1273-1319, June.
    25. Brown, James R. & Petersen, Bruce C., 2011. "Cash holdings and R&D smoothing," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 694-709, June.
    26. Li, Wanli & Xu, Xixiong & Long, Zhineng, 2020. "Confucian Culture and Trade Credit: Evidence from Chinese Listed Companies," Research in International Business and Finance, Elsevier, vol. 53(C).
    27. Irene Chu & Geoff Moore, 2020. "From Harmony to Conflict: MacIntyrean Virtue Ethics in a Confucian Tradition," Journal of Business Ethics, Springer, vol. 165(2), pages 221-239, August.
    28. Ghaly, Mohamed & Dang, Viet Anh & Stathopoulos, Konstantinos, 2015. "Cash holdings and employee welfare," Journal of Corporate Finance, Elsevier, vol. 33(C), pages 53-70.
    29. Jones, Derek C & Kato, Takao, 1995. "The Productivity Effects of Employee Stock-Ownership Plans and Bonuses: Evidence from Japanese Panel Data," American Economic Review, American Economic Association, vol. 85(3), pages 391-414, June.
    30. Kiridaran Kanagaretnam & Abdul-Rahman Khokhar & Amin Mawani, 2018. "Linking Societal Trust and CEO Compensation," Journal of Business Ethics, Springer, vol. 151(2), pages 295-317, August.
    31. Chen, Mengyuan & Xiao, Jason Zezhong & Zhao, Yang, 2021. "Confucianism, successor choice, and firm performance in family firms: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 69(C).
    32. Liang-Hung Lin & Yu-Ling Ho & Wei-Hsin Lin, 2013. "Confucian and Taoist Work Values: An Exploratory Study of the Chinese Transformational Leadership Behavior," Journal of Business Ethics, Springer, vol. 113(1), pages 91-103, March.
    33. Yang Liu & Weiqi Dai & Mingqing Liao & Jiang Wei, 2021. "Social Status and Corporate Social Responsibility: Evidence from Chinese Privately Owned Firms," Journal of Business Ethics, Springer, vol. 169(4), pages 651-672, April.
    34. Randall S Schuler & Nikolai Rogovsky, 1998. "Understanding Compensation Practice Variations Across Firms: The Impact of National Culture," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(1), pages 159-177, March.
    35. Chen, Jun & King, Tao-Hsien Dolly & Wen, Min-Ming, 2020. "Non-executive ownership and private loan pricing," Journal of Corporate Finance, Elsevier, vol. 64(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hanjin Xie & Chunmei Yang & Yanping Liu, 2023. "Urban Ecological Culture Construction and the Formation of Residents’ Green Living: Evidence from National Forest City Construction in China," Sustainability, MDPI, vol. 15(18), pages 1-20, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Min Huang & Xiaobo Li & Jun Xia & Mengyao Li, 2024. "Does Confucianism Prompt Firms to Participate in Poverty Alleviation Campaigns?," Journal of Business Ethics, Springer, vol. 189(4), pages 743-762, February.
    2. Hou, Fei & Shen, Huayu & Wang, Ping & Xiong, Hao, 2023. "Signing auditors' cultural background and debt financing costs," International Review of Financial Analysis, Elsevier, vol. 87(C).
    3. Shujun Chao & Shanyong Wang & Haidong Li & Shu Yang, 2023. "The power of culture: Does Confucian culture contribute to corporate environmental information disclosure?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(5), pages 2435-2456, September.
    4. Feng, Yumei & Yu, Qiang & Nan, Xingheng & Cai, Yongbin, 2022. "Can employee stock ownership plans reduce corporate financialization? Evidence from China," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 140-151.
    5. Kong, Xiaoran & Xu, Siping & Liu, Ming-Yu & Ho, Kung-Cheng, 2023. "Confucianism and D&O insurance demand of Chinese listed companies," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    6. Jung, Hail & Choi, Sanghak, 2021. "The effects of employee stock ownership on stock liquidity: Evidence from the Korean market," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    7. Lina Mao & Chongluan Lu & Guangfan Sun & Chunyan Zhang & Changwei Guo, 2024. "Regional culture and corporate finance: a literature review," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-12, December.
    8. Dongmin Kong & Jia Liu & Yanan Wang & Ling Zhu, 2024. "Employee Stock Ownership Plans and Corporate Environmental Engagement," Journal of Business Ethics, Springer, vol. 189(1), pages 177-199, January.
    9. Wu, Fang & Cao, June & Zhang, Xiaosan, 2023. "Do non-executive employees matter in curbing corporate financial fraud?," Journal of Business Research, Elsevier, vol. 163(C).
    10. Liu, Haiming & Chiang, Yao-Min, 2022. "Confucianism and IPO underpricing," Pacific-Basin Finance Journal, Elsevier, vol. 71(C).
    11. Xixiong Xu & Lingling Duan & Youliang Yan, 2019. "The Influence of Confucianism on Corporate Environmental Investment: Evidence from Chinese Private Firms," Sustainability, MDPI, vol. 11(21), pages 1-20, October.
    12. Fauver, Larry & McDonald, Michael B. & Taboada, Alvaro G., 2018. "Does it pay to treat employees well? International evidence on the value of employee-friendly culture," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 84-108.
    13. Chen, Shihua & Ye, Yan & Jia, Fei & Wang, Chengqi, 2022. "Accounting for the role of culture in board directors’ dissent," Research in International Business and Finance, Elsevier, vol. 61(C).
    14. Hongfeng Sun & Chang Liu, 2023. "Employee Stock Ownership Plans and Corporate Environmental Performance: Evidence from China," IJERPH, MDPI, vol. 20(2), pages 1-19, January.
    15. Koustubh Kanti Ray, 2016. "Employee stock option plan and firm performance: A quantile regression approach," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 6(6), pages 152-166, June.
    16. Fu Cheng & Shanshan Ji & Yucheng Chen, 2023. "The Contract Design of Employee Stock Ownership Plan and Enterprise Innovation Investment: Evidence from China," Sustainability, MDPI, vol. 15(3), pages 1-29, February.
    17. Fan, Yunqi & Xu, Zijing, 2022. "Audit firm's Confucianism and stock price crash risk: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 79(C).
    18. Irene Chu & Mai Chi Vu, 2022. "The Nature of the Self, Self-regulation and Moral Action: Implications from the Confucian Relational Self and Buddhist Non-self," Journal of Business Ethics, Springer, vol. 180(1), pages 245-262, September.
    19. Lei Zhou & Feng Wei & Yu Kong, 2022. "Do Employee Stock Ownership Plans Affect Corporate Social Responsibility? Evidence from China," IJERPH, MDPI, vol. 19(3), pages 1-19, January.
    20. Ben-Nasr, Hamdi & Ghouma, Hatem, 2018. "Employee welfare and stock price crash risk," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 700-725.

    More about this item

    Keywords

    Confucianism; Employee stock ownership; Informal institution;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecanpo:v:78:y:2023:i:c:p:859-872. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.