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An efficient allocation or financial distortion: Can employee stock ownership promote common prosperity within enterprises?

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  • Li, Xuezeng
  • Zheng, Haoyuan
  • Jiang, Yuanyuan

Abstract

This paper examines the impact of Employee Stock Ownership Plans (ESOPs) on the labor income share of companies, using a sample of A-share listed companies on the Shanghai and Shenzhen stock exchanges in China from 2012 to 2021. By employing a multi-period Difference-in-Differences (DID) approach to analyze the first implementation of ESOPs, the study finds that: ESOPs significantly increase the labor income share of companies, and this conclusion holds after a series of robustness checks. The impact of ESOPs on the labor income share is achieved through enhancing management's bargaining power, reducing the allocation of capital elements, and promoting digital transformation. The effectiveness of ESOPs varies across different companies. ESOPs have a more pronounced impact on income distribution in companies with a higher proportion of production workers, higher levels of human capital, lower market share, and more concentrated supply chains. Further analysis reveals that ESOPs primarily function by adjusting the income share of employees, with a stronger effect observed in non-state-owned enterprises.

Suggested Citation

  • Li, Xuezeng & Zheng, Haoyuan & Jiang, Yuanyuan, 2025. "An efficient allocation or financial distortion: Can employee stock ownership promote common prosperity within enterprises?," International Review of Economics & Finance, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:reveco:v:98:y:2025:i:c:s1059056025000681
    DOI: 10.1016/j.iref.2025.103905
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