Listed Companies In China: An Empirical Study Of Employee Ownership Plan And Corporate Performance

Employee Stock Ownership Plan (ESOP) is a new form of equity foundation. It is funded by internal employees by subscribing for part of the company shares and commissioned by the specialized agencies, such as Employee Stock Ownership and trust, with Employee-owned Management Committee participating in corporate governance and profit distribution in proportion to shares. Western Employee Stock Ownership theory has been paid more and more attention from the both angles of the property rights theory and human capital theory since the1950s. It has become the preferred way for many companies in motivating employees after decades of development. However, there is no uniform conclusion on whether employee shares can contribute to better business performance or whether employee stock ownership system can incentivize the staff. The one hand, employee stock ownership can reduce the agency problems, weaken the conflict between staff and management and encourage employees to work hard, share information, improve business productivity. On the other hand, incentives of the employee stock ownership system may disappear caused by "free rider".Taking1999-2010Listed Companies in China’s A-share market as the sample, this study regress the relationship between the Employee Stock Ownership and Corporate Performance with SAS and found some conclusions:(1) Employee stock ownership system in China is not a valid long-term incentive policy.(2) Employee stock ownership system does not promote the company’s market performance.(3) The purpose of sponsoring ESOPs is to make profit by selling employee shares after circulation.From what I mentioned above, we can see that China’s implementation of the Employee Stock Ownership is not in the purpose of enterprise development by improving competitiveness. Workers hope to sell employee stocks to make arbitrage gain after circulation without any care about business development. The practice of Employee Stock Ownership system in China is not successful. At last, this paper puts forward some specific policy advices on employee stock ownership system in China.