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Employee stock ownership plans and controlling shareholders’ over-appointing of directors

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  • Zhou, Lei
  • Wei, Feng

Abstract

Using a large sample of Chinese non-financial listed firms from 2014 to 2021, we find that employee stock ownership plans (ESOPs) significantly reduce controlling shareholders’ over-appointing of directors, and this finding is robust after addressing endogeneity concerns. We then provide evidence to show that reducing the risk of control transfer and controlling shareholders’ private benefits of control are important channels in which ESOPs affect controlling shareholders’ over-appointing of directors. Furthermore, we find that effect of ESOPs on controlling shareholders’ over-appointing of directors is less pronounced when firms with stronger corporate governance. We also demonstrate that the type of ownership, the source of funding, and the lock-up period of ESOPs can affect the effectiveness of ESOPs.

Suggested Citation

  • Zhou, Lei & Wei, Feng, 2024. "Employee stock ownership plans and controlling shareholders’ over-appointing of directors," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 1747-1770.
    • Handle: RePEc:eee:ecanpo:v:84:y:2024:i:c:p:1747-1770
    DOI: 10.1016/j.eap.2024.11.001
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    More about this item

    Keywords

    Employee stock ownership plans; Over-appointing of directors; Controlling shareholders; Corporate governance;
    All these keywords.

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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