Assessing the impact of the employee stock ownership plan using the Difference-in-Differences method


Authors

  • Luu Thu Quang Ho Chi Minh University of Banking
DOI: https://doi.org/10.57110/vnu-jeb.v4i3.289

Keywords:

ESOPs, firm performance, ROA, ROE, DID

Abstract

This study employs the Difference-in-Differences (DID) method to analyze the impact of the Employee Stock Ownership Plans (ESOPs) in the Vietnamese stock market using data collected from annual reports of listed companies in the period 2009-2019. Our findings indicate a significant improvement in Return on Assets (ROA) and Return on Equity (ROE) in the three years following ESOP implementation compared to the preceding three years. Companies adopting ESOPs have demonstrated better operating efficiency than those that do not. ESOPs show optimum effectiveness when they are issued to 10% or more of total employees. However, there is no definitive evidence linking ESOP issuance rate directly to overall firm performance. Based on these results, we recommend that CEOs and shareholders consider implementing ESOPs broadly among employees to maximize business performance rather than restricting them to a small management group.

References

Al Momani, K. M. D. K., Jamaludin, N., Abdullah, W. Z. W., & Nour, A. N. I. (2020). The effects of intellectual capital on firm performance of industrial sector in Jordan. Humanities & Social Sciences Reviews, 8, 184-192. https://doi.org/10.18510/hssr.2020.8222

Blasi, J., Kruse, D. & Weltmann, D. (2013). Firm survival and performance in privately held ESOP companies. In Sharing Ownership, Profits, and Decision-making in the 21st Century. Emerald Group Publishing Limited, 109-124. https://doi.org/10.1108/S0885-3339(2013)0000014006

Dunbar, A. E. & Kumbhakar, S. C. (1992). An empirical investigation of the association of productivity with employee stock ownership plans. The Journal of the American Taxation Association, 14, 22-38.

Dunn, G. P. & Daily, C. M. (1991). The fusion of privilege and power: ESOPs in theory and practice. Employee Responsibilities and Rights Journal, 4, 61-74. https://doi.org/10.1007/BF01390439

Handayani, F., & Yurniwati, Y. (2020). Analysis of the influence of employee stock ownership program (ESOP) application of company financial performance. Jurnal Ilmiah Universitas Batanghari Jambi, 20(2), 616-625. https://doi.org/10.33087/jiubj.v20i2.978

Kurland, N. (2018). ESOP plus benefit corporation: Ownership culture with benefit accountability. California Management Review, 60 (4), 51-73. https://doi.org/10.1177/0008125618778853

Lestari, H. S. (2021). Financial leverage and financial performance of conventional banks in Indonesia. Journal of Hunan University Natural Sciences, 48(2).

Ma, J., Guo, K., & Yu, J. (2020). Democracy and tax avoidance: An international study. Journal of Corporate Accounting & Finance, 31(1), 18-52. https://doi.org/10.1002/jcaf.22416

Malesky, E. J., Nguyen, C. V., & Tran, A. (2014). The impact of recentralization on public services: A difference-in-differences analysis of the abolition of elected councils in Vietnam. American Political Science Review, 108(1), 144-168. http://dx.doi.org/10.1017/S0003055413000580

Nelson, B. (2000). Shared endeavours: Inquiry into employee share ownership in Australia. House of Representatives Standing Committee on Employment. Canberra, Department of Education and Workplace Relations, 2-104. https://collection.sl.nsw.gov.au/record/74VvNx6JXM3l

Nguyen, T. K. N. (2022). Impact of employee stock ownership plan on employee commitment to the banking and finance sector in Vietnam. Economy & Forecast Review, 24(814).

Pendleton, A., Wilson, N. & Wright, M. (1998). The perception and effects of share ownership: Empirical evidence from employee buy-outs. British Journal of Industrial Relations, 36(1), 99-123. https://doi.org/10.1111/1467-8543.00082

Ros, A. J. (2003). Do ESOPS motivate employees? Worker effort, monitoring and participation in employee-owned stock ownership plans. Advances in the Economic Analysis of Participatory & Labor-Managed Firms, 7, 83-103. https://doi.org/10.1016/S0885-3339(03)07006-6

Scarpati, K. D. (2023). Organizational Attractiveness and Employee Longevity at Employee Stock Ownership Plan (ESOP) Companies in Northern New England. Doctoral dissertation, Wilmington University (Delaware).

Tran, P. H. H. (2020). Effectiveness of policy measures to promote employee share ownership programs in banks. Journal of Behavioral and Experimental Finance, 28, 100401. https://doi.org/10.1016/j.jbef.2020.100401

Xiao, H., Shi, Y. & Varma, A. (2019). The effects of employee stock ownership plans on career development in a new era: Evidence from China’s manufacturing transformation. Career Development International, 24(5), 453-474. https://doi.org/10.1108/CDI-05-2018-0126

Downloads

Download data is not yet available.

Additional Files

Published

25-06-2024

Abstract View

187

PDF Downloaded

0

How to Cite

Luu Thu Quang. (2024). Assessing the impact of the employee stock ownership plan using the Difference-in-Differences method. VNU JOURNAL OF ECONOMICS AND BUSINESS, 4(3), 63. https://doi.org/10.57110/vnu-jeb.v4i3.289

Issue

Section

Original Article