Author:
Li Yan,Sun Bao,Yu Shangyao
Abstract
Abstract
This paper examines whether the announcement of an employee stock ownership plan (ESOP) affects stock price crash risk and the mechanism by which the ESOP may influence crash risk, using a sample of Chinese A-share firms from the period 2014 to 2017. We provide evidence that an ESOP announcement is significantly and negatively related to a firm’s stock price crash risk. An ESOP announcement sends positive signals to the market that insiders are optimistic about a firm’s future value, which helps enhance investor confidence, resist the pressure for a fire sale caused by negative information disclosure, and reduce stock price crash risk. Further research shows that larger-scale, lower-priced and non-leveraged ESOPs are more helpful in reducing crash risk. This paper sheds lights on the impact of ESOPs in a volatile market environment. It also contributes to firms’ implementation of ESOPs and the development of the legal system in capital markets.
Funder
National Natural Science Foundation of China
National Planning Office of Philosophy and Social Science
Ministry of Education of the People's Republic of China
Publisher
Springer Science and Business Media LLC
Subject
Public Administration,General Business, Management and Accounting
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