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Employee stock ownership plans and capital expenditures in China

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  • Jin Dai
  • Chong Gao
  • Qian Sun

Abstract

This study examines how employee stock ownership plans (ESOPs) affect long‐term investments or capital expenditures in China. Using a sample of listed companies from 2011 to 2021, we find that ESOPs negatively affect capital expenditures. This negative effect is stronger for firms with less institutional shareholding and older CEOs. Also, the effect is more pronounced for ESOPs with shorter vesting periods, debt financing, higher employee participation rates and more managerial holding. These results indicate that the unique features of China's ESOPs are likely to foster managerial opportunism and lead to a decline in long‐term investments for ESOP‐adopting firms. This study highlights the importance of the design of an ESOP, as it can erroneously impact the incentives of ESOP participants.

Suggested Citation

  • Jin Dai & Chong Gao & Qian Sun, 2024. "Employee stock ownership plans and capital expenditures in China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(4), pages 4095-4130, December.
    • Handle: RePEc:bla:acctfi:v:64:y:2024:i:4:p:4095-4130
    DOI: 10.1111/acfi.13298
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