Employee Stock Ownership Plan, Board Structure, and Firm Value: Evidence from Taiwan

Abstract

The authors explore the effect of an employee stock ownership plan on firm value and examine the following important findings. First, they reveal that a firm with better corporate governance, such as a higher directors’ holding ratio, higher institutional holding ratio, and small board size will have better stock price performance resulting in the enhancement of firm value. Second, firms with higher institutional holdings that are implementing an ESOP actually might not enhance firm value, compared to firms with higher institutional holdings that do not implement an ESOP; this may be the result of interest and influence by institutional investors who are likely to be affected by the ESOP. The authors explain that understanding these results may be useful for investors in personal financial planning and wealth management in terms of screening investing targets.