Research On ESOP Of SZkingdom Co., Ltd

Employee Stock Ownership Plan(ESOP)is a scheme proposed by Louis Kelso,an American economist in 1950 s,based on the two-factor economic theory.The scheme is a long-term incentive mechanism for employees to participate in the sharing of corporate benefits by letting them hold the company's stock.In the 1970 s and 1980 s,ESOP developed rapidly in western countries,while it started late in China.In the 1980 s,only a few enterprises carried out ESOP in China,but most of them failed to achieve the expected results.In 2014,China Securities Regulatory Commission issued the guidance on the pilot implementation of ESOP in listed companies,which makes the implementation of ESOP in listed companies have rules to follow.Therefore,ESOP in China has entered a rapid development period.The main purpose of implementing ESOP is to establish and improve the benefit sharing mechanism between employees and owners,improve the level of corporate governance,improve the cohesion of employees and the competitiveness of the company,and promote the sustainable and healthy development of the company.In recent years,in the enterprises that have implemented ESOP,some ESOP achieve the initial goal,and a large proportion of ESOP fail to achieve the purpose of encouraging employees and promoting the development of enterprises,and even cause the loss of employees or related stakeholders.Based on this,it is necessary to study the reasons for the failure of ESOP.In this paper,Shenzhen Jinzheng Technology Co.,Ltd.(hereinafter referred to as Jinzheng)is selected as the research object to study the failure of the second phase of ESOP in 2016.After combing the related concepts of ESOP and Chinese and foreign literature,this paper analyzes the mechanism of ESOP affecting company performance according to relevant theories,and analyzes the case.First of all,it introduces the general situation of the case company and the implementation process,case design,basic characteristics and motivation of its ESOP.Secondly,it studies the impact of ESOP on financial performance,non-financial performance and shareholders' wealth effect by using comparative analysis and financial index analysis.Finally,it studies the problem of employees' ESOP and analyses the reasons for its failure.According to the analysis,the results of the implementation of the ESOP of Jinzheng are as follows:(1)the ESOP of Jinzheng has not effectively improved the development ability of profitability,operation ability and debt paying ability,and some financial indicators have an obvious negative correlation.(2)The ESOP of Jinzheng has some positive effects on human resource structure and innovation ability,which helps to retain the employees,but the enthusiasm of employees has not been effectively improved.(3)The ESOP of Jinzheng makes the four major shareholders of Jinzheng take on a huge loss,which makes the employees participating in the plan lose the time cost of investment funds;meanwhile,it has an obvious stimulating effect on the short-term stock price of Jinzheng,and shows a significant negative correlation in the medium and long term.The main reasons for the failure of the ESOP are:(1)the use of quadruple leverage increases the risk of implementation and the loss of large shareholders as guarantors;at the same time,under the background of the national financial "de leveraging" policy,it also increases the risk of implementation.This factor is the main reason for the failure of its ESOP.(2)The four major shareholders of Jinzheng contracted for the loss of employees in the shareholding plan.This factor not only did not improve the enthusiasm of employees,but also reduced the enthusiasm and sense of responsibility of employees,which had a negative impact on the company's operation.(3)A lower cash dividend ratio makes it impossible for market investors to determine the actual operation of Jinzheng.At the same time,a lower dividend is not conducive to the long-term incentive of employee stock ownership plan.This factor is also one of the reasons for its failure.Based on the above analysis,this paper holds that:(1)in the implementation of ESOP,enterprises need to reduce the proportion of leverage as much as possible.Under the background of "bull short bear long" in A-share market,leverage is in the role of expanding risk for a long time.(2)Enterprises should make and implement ESOP according to their own situation,and at the same time,they should grasp the opportunity of ESOP implementation and avoid blindly following the trend.(3)It is not only unable to improve the enthusiasm of employees,but also has the risk of reducing the enthusiasm of employees.(4)Listed companies should pay attention to cash dividends.A reasonable cash dividend can not only improve corporate governance,but also ensure the long-term incentive of ESOP.