An Empirical Study Of Employee Ownership Plans' Effect On Company Financial Performance And Market Reaction

The Employee Ownership Plan is a mechanism by which internal employees share the ownership of the company and participating in the distribution of the company's profits by holding the shares of the corporation.The Employee Stock Ownership Plan was introduced into China in the 1980s,and was later standardized,halted,and restarted.Until June 2014,China Securities Regulatory Commission issued "Guiding Opinions on Pilot Projects of Listed Companies Implementing Employee Stock Ownership Plans",which fully affirmed the necessity of implementing the Employee Stock Ownership Plan and defined the relevant contract elements of norms.After that,the promotion of the Employee Stock Ownership Plan has entered a new period.As the data that gathered till June 2017 shows,the Employee Ownership Plan suffered from 'cool off' for promotion of plan and the stock price below cost price.So whether it is valuable to promote the Employee Ownership Plan in the new period is worthwhile to research,especially whether Employee Stock Ownership Plan can be used in improving the financial performance of listed companies and whether the stock market react positively to Employee Stock Ownership Plan's preplan announcement.This paper firstly sorts out the current domestic and foreign research of Employee Ownership Plans' effect on company financial performance and market reaction,and points out that domestic scholars have limited research on the effect of the Employee Stock Ownership Plan in the new period,then accordingly puts forward the direction of research.After a brief review of the development of Employee Stock Ownership Plans in China,this paper illustrates the current status of Employee Stock Ownership Plans in the new period,then indicates the characteristics of contract elements of norms and some relevant existing problems.On this basis,this paper analyzes the effect of the Employee Stock Ownership Plan by Two-Factor Economic Theory,Human Capital Theory,Principal-Agent Theory and Incentive Theory,then proposes that the Employee Stock Ownership Plan can help improve the financial performance of the company and its preplan announcement can produce a positive stock market effect.Furthermore,this paper predicts that shareholding size,manager subscriptions ratio and stock sources have different effects on the company's financial performance and market reaction.Finally,the Paired T-test method and Regression Analysis method are used to test the assumptions about the effect of Employee Stock Ownership Plan on company financial performance.The Event Research method and Group Inspection Method are used to test the assumptions about the market reaction of Employee Stock Ownership Plan's preplan announcement.Finally this paper obtains the following conclusions:Employee Stock Ownership Plan can improve the company's financial performance in the short term.The shareholding size and manager subscriptions ratio are positively correlated with the improvement of the company's financial performance.Employee Stock Ownership Plan taking non-public offering can improve the company's financial performance more positively than those taking other ways to get stocks.The Employee Stock Ownership Plan preplan announcement can have a positive market reaction.The shareholding size and manager subscriptions ratio are positively correlated with market reaction.Employee Stock Ownership Plan taking non-public offering can produce more positive market reaction than those taking other ways to get stocks.The main innovation of this paper is the perspective.Based on the promotion of Employee Stock Ownership Plan,this paper puts forward combining with two aspects of financial performance and market reaction to evaluate the effect of employee stock ownership plan,and adds per capita subscription amount to Indicate the shareholding size,aiming at making a more comprehensive evaluation of the effect of Employee Stock Ownership Plans which have different contract elements.