A Case Study Of Corun’s Employee Stock Ownership Plan And Its Market Response

The content of ESOP(employee stock ownership plan)is that the employees of the company can share the benefits of the company and stimulate their work creativity and enthusiasm by holding the stock of the company.In the 1970 s and 1980 s,ESOP gained relatively rapid development in Western countries,but it started relatively late in China until the release of the "guiding opinions on the pilot implementation of ESOP in listed companies" in 2014,it has standardized the concrete process of implementing ESOP in China’s listed companies,which makes the implementation of ESOP in China enter the period of blowout.However,with the large fluctuation of the stock market in China starting from the middle and late June of 2015,more and more companies implementing ESOP are in a state of floating loss due to various reasons,not only does the implementation of ESOP not benefit the employees,it’s costing people a lot of money.What is the short-and long-term market reaction to the implementation of ESOP? What is the specific reason for such a market reaction? How to improve the employee stock ownership system in order to bring maximum benefit to the company and employees? This has become a topic of discussion and research in the academic community.This article through the existing relevant literature,found that domestic and foreign scholars on the implementation of ESOP motivation and effectiveness of empirical research more,however,there are relatively few case studies on the content and implementation of esop in a specific company.In this context,as a modern high-tech private enterprise,corefar’s shareholding plan was extended three times,and the share price dropped,causing ESOP to lose nearly 60%,and the employees to suffer a big loss,it means that the final effect of the ESOP implementation is contrary to the initial implementation motivation,which has a bad influence on the interests of the employees and the company and the future implementation environment of ESOP in China.The case study is different from the empirical study in that it can further analyze the reasons behind the phenomenon on the basis of a detailed description of the event phenomenon,which not only shows the present situation of "how",answering the "why" question again gives the researcher and analyst a clear grasp of the full In & Out of the event and the nature of the problem,and then identifies common issues from the individual cases.Based on this,it is necessary to carry on the thorough case study to the ESOP implemented by Keliyuan.Based on the analysis of the market reaction before and after the implementation of the employee stock ownership plan,this paper uses the case study method and the event study method,then combined with the case study on the reasons for such a market reaction.The main research is as follows: First,calculate the daily excess rate of return and the cumulative excess rate of return before and after the event window for 2 and 5days to explore the short-term market performance of Corun’s ESOP implementation;And analyze the relationship between ESOP and long-term market performance through the change of stock price.Second,based on the design of the ESOP,the timing of the release and the market environment,this paper analyzes the reasons why the long-term market response of the ESOP is not good and leads to the huge loss of the staff.The results show that,in the short term,the market will respond positively to the release of ESOP,but there are many factors affecting ESOP,design factors,implementation timing,external market environment will have an important impact on the implementation of ESOP results.Finally,the paper proposes that the implementing company can control the leverage ratio,diversify the sources of funds,strengthen the disclosure of relevant information,and combine their own financial situation to choose the appropriate implementation timing;Regulators can improve the implementation of ESOP by raising the threshold of implementing ESOP.This paper analyzes the concrete implementation of Corrigan,which has not received a good long-term market response to the implementation of ESOP after the promulgation of the guiding opinions,and hopes to find common problems from individual cases,through the implementation of the company and the relevant regulatory authorities put forward relevant practical suggestions to improve China’s relevant institutional arrangements and design,at the same time for China’s current esop-related system development experience,then the content of the case study is enriched.