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Employee Stock Purchase Plans

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  • Gary V. Engelhardt
  • Brigitte C. Madrian

Abstract

Employee stock purchase plans (ESPPs) are designed to promote employee stock ownership broadly within the firm and provide another tax-deferred vehicle for individual capital accumulation in addition to traditional pensions, 401(k)s, and stock options. We outline the individual and corporate tax treatment of ESPPs and the circumstances under which ESPPs will be preferred to cash compensation from a purely tax perspective. We then examine empirically ESPP participation using administrative data from 1997-2001 for a large health services company that employs approximately 30,000 people. The picture that emerges from the analysis of these data suggests that there is substantial non-participation in these plans even though all employees could increase gross compensation through participation. We discuss a number of potential explanations for non-participation.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10421.

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Date of creation: Apr 2004
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Publication status: published as Engelhardt, Gary V. and Brigitte C. Madrian. "Employee Stock Purchase Plans," National Tax Journal, 2004, v57(2,Jun), 385-406.
Handle: RePEc:nbr:nberwo:10421

Note: AG CF LS PE
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  1. Gary V. Engelhardt & Anil Kumar, 2007. "Employer matching and 401(k) saving: Evidence from the health and retirement study," NBER Chapters, in: Trans-Atlantic Public Economics Seminar (TAPES), Public Policy and Retirement, pages 1920-1943 National Bureau of Economic Research, Inc.
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Cited by:
  1. Thomas Rapp & Nicolas Aubert, 2011. "Bank Employee Incentives and Stock Purchase Plans Participation," Journal of Financial Services Research, Springer, vol. 40(3), pages 185-203, December.
  2. Alex Bryson & Richard B. Freeman, 2010. "To join or not to join? Factors influencing employee share plan membership in a multinational corporation," LSE Research Online Documents on Economics 48915, London School of Economics and Political Science, LSE Library.

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