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An empirical analysis of the corporate control, tax and incentive motivations for adopting leveraged employee stock ownership plans
Author(s) -
Beatty Anne
Publication year - 1994
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090150405
Subject(s) - incentive , business , stock (firearms) , stock options , control (management) , accounting , microeconomics , industrial organization , public economics , finance , economics , mechanical engineering , management , engineering
This paper examines three motivations for leveraged ESOP adoption: as a takeover defense, as a mechanism for providing incentives to employees and as a vehicle for tax savings. ESOP adoption is more likely for companies with a higher predicted probability of takeover, but ESOP adopters have many characteristics that are different from takeover targets. Companies that adopt ESOPs can be distinguished from non‐adopting companies based on characteristics associated with the tax and incentive effects of these plans. The size of the ESOP is shown to depend primarily on the tax and incentive characteristics.