THE EFFECTS OF EMPLOYEE STOCK OWNERSHIP PLANS ON THE FINANCIAL PERFORMANCE OF THE ELECTRICAL AND ELECTRONIC MACHINERY, EQUIPMENT, AND SUPPLIES INDUSTRY

The objective of this study was to determine the effect employee stock-ownership plans (ESOPs) had on corporate performance. ESOPs grew rapidly in popularity in the United States during the 1970's, but there was limited and inconclusive research about the effects of these plans.;Statistical analysis of the financial ratios and the productivity ratio for the four years examined in the study, 1978 - 1981, was mixed. Of the total of twenty ratios examined, 11 were statistically positive and 9 were statistically negative. However, only three values, two positive and one negative, were statistically significant.;For the years 1980 and 1981, the ESOP firms outperformed the non-ESOP firms for all five ratios, except for one ratio in one year. In addition, for four of the five ratios, the ESOP firms' performances increased during this same time period.;The conclusion was that this research did not show a justification for the corporate administrative and governmental expenses incurred to implement ESOPs. The results of this study supported past research and demonstrated the need for further research on this topic.;To determine the effect of ESOPs several tools were used in this study. A total of four financial ratios were examined: (a) net profits on net sales, (b) net profits on tangible net worth, (c) net profits on net working capital and (d) net sales to tangible net worth. In addition to the financial ratios a productivity ratio, net sales to employees, and an opinion questionnaire also were examined. These six methods of analysis were applied to eight matched pairs of ESOP and non-ESOP firms in the Electrical and Electronic Machinery, Equipment, and Supplies Industry.