RESEARCH ARTICLE
Employee stock ownership plans and capital expenditures in China
Jin Dai,
Chong Gao,
Qian Sun,
Jin Dai
School of Management, Fudan University, Shanghai, China
Search for more papers by this authorChong Gao
School of Accounting, Shanghai University of International Business and Economics, Shanghai, China
Search for more papers by this authorCorresponding Author
Qian Sun
School of Management, Fudan University, Shanghai, China
Correspondence
Qian Sun, School of Management, Fudan University, Shanghai 200433, China.
Email: [email protected]
Search for more papers by this authorJin Dai,
Chong Gao,
Qian Sun,
Jin Dai
School of Management, Fudan University, Shanghai, China
Search for more papers by this authorChong Gao
School of Accounting, Shanghai University of International Business and Economics, Shanghai, China
Search for more papers by this authorCorresponding Author
Qian Sun
School of Management, Fudan University, Shanghai, China
Correspondence
Qian Sun, School of Management, Fudan University, Shanghai 200433, China.
Email: [email protected]
Search for more papers by this authorFirst published: 26 June 2024
The authors are listed in alphabetical order.
Abstract
This study examines how employee stock ownership plans (ESOPs) affect long-term investments or capital expenditures in China. Using a sample of listed companies from 2011 to 2021, we find that ESOPs negatively affect capital expenditures. This negative effect is stronger for firms with less institutional shareholding and older CEOs. Also, the effect is more pronounced for ESOPs with shorter vesting periods, debt financing, higher employee participation rates and more managerial holding. These results indicate that the unique features of China's ESOPs are likely to foster managerial opportunism and lead to a decline in long-term investments for ESOP-adopting firms. This study highlights the importance of the design of an ESOP, as it can erroneously impact the incentives of ESOP participants.
Open Research
DATA AVAILABILITY STATEMENT
All data are available from the commercial databases cited in the paper.
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