Employee stock ownership and value creation: evidence from system GMM estimates
ISSN: 0307-4358
Article publication date: 1 April 2021
Issue publication date: 12 August 2021
Abstract
Purpose
This paper attempts to examine the nature of the relationship between employee stock ownership (ESO) and value creation in the context of shareholder governance.
Design/methodology/approach
The research sample includes 129 French CAC All-Tradable index companies observed from 2015 to 2019. The system generalised moment (GMM) estimator (Blundell and Bond, 1998) is used in the dynamic panel.
Findings
The results estimated from the system GMM model show a threshold effect in the ESO–value creation relationship. For an employee shareholding ratio less than 3%, ESO has a positive impact on value creation; above this level, the impact becomes negative. Furthermore, the nature of the relationship largely depends on the form of employee shareholding.
Research limitations/implications
These results are with strong economic implications. The risk of CEO entrenchment increases with the rise in share parts owned by employees. Companies with high shareholder value creation are companies with low employee ownership.
Originality/value
The main contribution in this study is that the form of ESO was considered in our analysis, which was not done in previous research. Another contribution is the use of recent data (2015–2019), which takes into account the large-scale development of French ESO practices, especially the absence of crises that may bias the results.
Keywords
Citation
Garfatta, R. and Zorgati, I. (2021), "Employee stock ownership and value creation: evidence from system GMM estimates", Managerial Finance, Vol. 47 No. 9, pp. 1270-1285. https://doi.org/10.1108/MF-10-2020-0517
Publisher
:Emerald Publishing Limited
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