THE EFFECTS OF ESOPS ON PERFORMANCE AND RISK: EVIDENCE FROM FRANCE

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Stéphane Trébucq ORCID logo

https://doi.org/10.22495/cocv1i4p7

Abstract

Approximately 220 of the 700 firms whose stock was traded on the main French markets had an employee stock ownership plan at the end of the year 2000. Average ownership was 3.7%. Employee ownership can be implemented for many reasons, and the relationship between ESOPs and performance still remains unclear. The purpose of this research is thus to determine how employee ownership can affect corporate performance and risk in France. This study improves upon previous work by using ownership, performance and risk variables, as well as control variables (sector, size, debt, growth), applied to a large sample of French firms. Cross-sectional regressions show some positive links between the presence of ESOPs and some financial performance measures, such as the return on equity and the return on investments. Links between ESOPs and risk variables are more complicated. The presence of ESOPs reduces the return on equity variability, but the more employee ownership there is the more the beta coefficient increases. This result seems to show that investors tend to consider firms with ESOPs to be more risky, even if their profitability is more stable. Within the limitations of these results, we propose a general model introducing the concept of social capital.

Keywords: Employee Stock Ownership Plan, Corporate Performance, Social Capital

How to cite this paper: Trébucq, S. (2004). The effects of ESOPs on performance and risk: Evidence from France. Corporate Ownership & Control, 1(4), 81-93. https://doi.org/10.22495/cocv1i4p7