Research On The Market Response And Long-Term Performance Of Employee Stock Ownership Plan

Against the backdrop of China’s rapid economic growth,high-tech enterprises are no longer content with their present situation,but must strive to create a new development pattern.Faced with the fact that some of their core technologies are restricted by others and the competition in the industry is fierce,domestic enterprises must not only ensure that they have sufficient financial support in their operations,but also strengthen the guiding principle of cultivating human capital.For micro enterprises,employees are the core elements of production innovation and value creation,and it is crucial for enterprises to give them the necessary equity incentives to realise the interest bundling mechanism between enterprises and internal employees.Therefore,the implementation of employee share ownership plans has become an effective way for enterprises to stimulate employees’ work potential and improve their own performance.Although the development of employee share ownership plans in China has been paid much attention by domestic and foreign scholars,there is still a lack of research in the existing literature on the economic consequences of implementing employee share ownership plans in the form of case studies due to information disclosure issues.Among them,it is still worth further research on whether the choice of listed companies to implement employee share ownership plans produces effective incentive effects and in what way the plan improves the short-term market response and long-term performance level of the enterprise.This paper explores the theoretical basis of dualistic economic theory,profitsharing theory,principal-agent theory,and human capital theory based on a single-case study format.Based on a review of the present situation of research on employee share ownership plans,takes the implementation of an employee share ownership plan by Torch Electron,a listed enterprise,as the research object.Through the comparison of the three types of ESOP,the paper examines the effect of ESOP on the short-term response and long-term performance,and figures out the impact paths.Firstly,the shortterm market reaction to the implementation of employee share ownership plans was investigated through the short-term event study method.Secondly,the long-term financial performance of Torch Electron is examined using the financial indicator analysis method,and a control group sample is established using the propensity score matching method to analyse whether the employee share ownership plans can promote the long-term financial performance of the enterprise in a cross-sectional comparison,meanwhile the long-term event study method is applied to further investigate the changes in the long-term market performance of Torch Electron following the implementation of the employee share ownership plans.Finally,the impact path of employee share ownership plans on corporate performance is clarified based on the perspectives of human capital,corporate governance and innovation capability.This paper finds that(1)In terms of short-term market response,the implementation of employee share ownership plans can bring positive announcement effects to a enterprise’s share price.(2)In terms of long-term performance,the implementation of employee share ownership plans can help improve the long-term financial performance and market performance of enterprises.(3)The broader the coverage of employee share ownership plans,the higher the proportion of employee share ownership and the longer the lock-up period,the more conducive to enhancing the long-term performance of enterprises.(4)The influence path analysis shows that employee share ownership plan further enhances corporate governance and effectively promote corporate innovation and sustainable development by activating employees’ initiative and increasing their enthusiasm for work and corporate innovation output.The conclusions of this paper offer a sound basis to the new round of enterprises that want to conduct employee share ownership plans,and expect to offer a reference for the institutional design and practical outcomes of employee share ownership plans in China.