Abstract
Few studies have discussed the relationship between employee stock ownership plans (ESOPs) and corporate social responsibility (CSR). Using a sample of 895 A-share public firms in China, this research examines the effects of ESOPs on CSR, and the moderating effects of wedge structure and firm size on this relationship. This research mainly used the OLS model to test the research hypotheses, and all regressions were performed in Stata15. The results show that the ESOPs of Chinese public firms provide external economic incentives and internal psychological incentives for employees, increase their motivation to engage in CSR activities, and ultimately contribute to CSR. At the same time, this research finds that this relationship is stronger for firms without wedge structure and small firms. This research provides insights for understanding the relationship between ESOPs and CSR and has important managerial implications for firms to pay attention to the interests of employees to achieve sustainable development.
Highlights
Since its introduction to the United States in the twentieth century, employee stock ownership plans (ESOPs) have attracted widespread attention from practitioners and academics as an internal corporate incentive
We find that the relationship between ESOPs and corporate social responsibility (CSR) is affected by firm size, and ESOPs are susceptible to free-riding problems in large firms
As ownership structures are crucial to the effectiveness of ESOPs, we further examined the impact of wedge structure on the relationship between ESOPs and CSR
Summary
Since its introduction to the United States in the twentieth century, employee stock ownership plans (ESOPs) have attracted widespread attention from practitioners and academics as an internal corporate incentive. As of 31 December 2019, more than 430,000 ordinary employees in China have subscribed for shares in their companies through ESOPs. Despite the significant academic attention directed to the relationship between ESOPs and firm performance, empirical findings remain mixed [1,2]. Some studies have indicated that ESOPs may reduce agency conflicts and promote cooperation and mutual monitoring among co-workers [3,4,5]. Other studies have argued that ESOPs are a measure for management to entrench itself and reverse takeovers, leading to poor corporate governance [6,7]
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