Employee Stock Ownership Plan And Corporate Risk-taking

In June 2014,CSRC issued the "Guidelines on Listed Companies Employee Stock Ownership Plan(ESOP)".It provides a good opportunity for the study of the important human resources--The role of employees in the enterprise.In China,due to the short time of ESOP implementation,there are domestic few empirical literatures about ESOP,and the studies are not deep and comprehensive enough.This paper uses the samples of Chinese A-share listed companies from 2014 to 2018 to research the relationship between ESOP and firm risk-taking.The empirical results show that,(1)Firm risk-taking and ESOP is significantly negative correlation;(2)In the companies of employee higher organizational status,the negative effect is more pronounced;(3)Their nature of state-owned property rights can weaken the negative influence of ESOP on their risk-taking;(4)Compared to executive stock ownership in ESOP,employee stock ownership is the main driver of the the incentive effect of firm risk-taking;(5)The documented relation becomes more negative as stock-based executive compensation increases.Further,the decline of the firm risk-taking level largely stems from a kind of more cautious overall investment.ESOP reduces over-investment problems and bankruptcy risk significantly,which shows ESOP restricts the tendency to blindly adventure,indicating that the decline in risk-taking is actually benign caution.The employee stock ownership plan enhances bargaining power of employees,encourages employees to participate in the ownership of the company,which reduce the excessive risk-taking behavior of enterprises and help the long-term sustainable development.This study confirms that as an important role of internal corporate governance,ESOP can significantly affect the firm risk-taking.This paper firstly researches the relationship between firm risk-taking and ESOP,enriching the existing risk-taking research literature;at the same time,this paper can be a reference for the study of ESOP.We will provide theoretical and practical support for understanding the superiority of the current system for ESOP and the special national conditions,and for policy advice purposes.