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THE ECONOMIC CONSEQUENCES OF ESOPS
Author(s) -
Johnson Ramon E.,
Pratt Richard T.,
Stewart Samuel S.
Publication year - 1982
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1982.tb00627.x
Subject(s) - equity (law) , economics , replicate , stock (firearms) , actuarial science , business , law , political science , mechanical engineering , statistics , mathematics , engineering
The purpose of this paper is to assess the economic consequences of Employee Stock Ownership Plans (ESOPs) by developing a general analytical model. The model is used to compare ESOPs with attempts to replicate the effects of ESOPs via alternative arrangements. The general conclusion of the paper is that in the absence of improved employee motivation, ESOP implementation has no particular economic consequence. However, an important exception to this finding may be the inexpensive access to the equity markets for the smaller, non‐public firm provided by the ESOP.