Employee Stock Purchase Plans Research Articles

Sharing the ownership in Peru and Mexico: the case of a French MNE prompting the SDGs achievement

PurposeThis study aims to investigate how a French multinational enterprise (MNE) is developing employee stock ownership (ESO) in its subsidiaries in Peru and Mexico, both Latin American countries with deep social and economic inequalities.Design/methodology/approachThis is a qualitative case study which conducted interviews with representatives of the French MNE and its subsidiaries in Peru and Mexico.FindingsThe employee stock purchase plans offered by the company to its employees support the achievement of the sustainable development goals (SDGs) 1, 8 and 10 in these countries.Social implicationsThe authors argue that MNEs could become flagships in the SDG achievement in emerging economies.Originality/valueBy contributing to better workplace outcomes and enhanced corporate performance, ESO is in line with SDG 8. ESO also fulfills SDGs 1 and 10 by allowing employees to build up savings and wealth, whose lack is the main source of inequality and poverty. Reciprocity and binary economics theories explain these relationships.

An Empirical Examination of Predictors of Employees’ Participation in Employee Stock Purchase Plans

An Empirical Examination of Predictors of Employees’ Participation in Employee Stock Purchase Plans

The Hidden Cost of Profit Sharing on Participation in Employee Stock Purchase Plans

Many firms use equity-based profit sharing to boost participation in employee stock purchase plans (ESPPs). Using a large panel data set (N=262,824) of a multinational firm, we compare the reactions of former ESPP participants and non-participants to a profit sharing distribution (PSD). We find a dysfunctional effect. Although many former non-participants sign in, almost a similar share of employees leave the ESPP after the PSD. A closer look highlights the importance of social preferences when all employees enjoy profit sharing. Prosocial former participants show a motivational crowding out effect and leave the program, as the equity norm is violated.

Employee Financial Participation Plan Implementation in the United States and the Netherlands: Lessons for Indonesia

Employees have a major role in the sustainability of an organization. Employee satisfaction and business accomplishment are equally significant for the company’s sustainability. One of the strategies companies undertake to create a harmonious workplace and stimulate productivity is by giving recognition, awards and/or compensation to their employees. In recent years, equity-based compensation through employee financial participation plans has been becoming more popular. There are several tailor-made participation schemes which may vary among jurisdictions. There include Stock Grants, Direct Employee Stock Purchase Plans, Phantom Stock, Stock Appreciation Rights (SARs) and Employee Stock Ownership Plans (ESOP). Consequently, the employees could be the beneficiary owner of the shares or be actual shareholders in the company. When employees own shares, they will be treated as shareholders. Depending on the restrictions laid out in the employee financial participation plan. This means that employees could be involved in corporate governance in the company.

Attention for the Inattentive: Positive Effects of Negative Financial Shocks*

Abstract Using unique data on employee ownership plans, we find that negative shocks lead to changes in portfolio choices among previously inattentive investors. Employees within employee ownership plans did not actively select into ownership, but instead received grants upon employment. Many employees remain initially passive within these plans. However, following the 2008 Financial Crisis, they become more likely to exercise options, sell restricted stock, and participate in an Employee Stock Purchase Plan (ESPP). These changes likely improve welfare. For example, nonparticipation in an ESPP leaves money on the table. Our results improve our understanding of how investors’ personal return experiences affect investment choices. Negative shocks can increase attention among previously passive investors, yielding decisions that are closer to the optimum.

Learning from Coworkers: Peer Effects on Individual Investment Decisions

ABSTRACTUsing unique data on employee stock purchase plans (ESPPs), we examine the influence of networks on investment decisions. Comparing employees within a firm during the same election window with metro area fixed effects, we find that the choices of coworkers in the firm's ESPP exert a significant influence on employees’ own decisions to participate and trade. Moreover, we find that the presence of high‐information employees magnifies the effects of peer networks. Given participation in an ESPP is value‐maximizing, our analysis suggests the potential of networks and targeted investor education to improve financial decision‐making.

I am therefore I own: Implications of organization‐based identity for employee stock ownership

AbstractMost research on employee stock plan participation investigates the effects of such forms of ownership on employee attitudes, leaving our understanding of the individual differences that contribute to employee ownership largely unknown. Drawing from the consumer behavior literature, our study explores the effect of organization‐based identity on the decision to participate in an employee stock purchase plan. The study was conducted in a newly public firm where we examine the effect of organization‐based identity on the purchase decision in two time periods. The first point in time was the initial public offering (IPO), when the employee has little information on how the firm's stock will perform in the market. The second point in time was the first quarter following the IPO, when employees have market data to help them with decision‐making. Results indicate that, as predicted, organization‐based identity is associated with participation in an employee stock purchase plan, at both points in time, above and beyond the influence of several economic and psychological predictors reported in prior studies.

Financial decisions of the financially literate

Cet article étudie la performance du portefeuille d’épargne d’entreprise d’une cohorte d’environ 30 000 employés d’une banque française cotée. Nous disposons d’informations détaillées sur chaque poste de travail dans la banque, ce qui nous permet d’étudier les connaissances financières, les connaissances spécifiques des plans offerts et les informations privées des employés. Ces employés de banque mieux informés sont censés adopter un comportement qui est le plus proche de celui d’un investisseur rationnel averti. Nous étudions la performance du portefeuille des employés dans les plans d’épargne et montrons que l’expertise financière et la connaissance des plans sont liés à la participation aux plans offerts par l’entreprise. L’expertise financière améliore la performance individuelle du portefeuille d’achat d’actions des employés (ESPP) mais pas celle du plan d’épargne d’entreprise (CSP) et à la performance globale des deux plans proposés. Dans les deux cas, la participation est plus probable parmi toutes les catégories d’emploi (y compris les experts financiers), les femmes, les employés plus diplômés et les employés plus contraints financièrement. Nous mettons en évidence la comptabilité mentale liée à l’actionnariat salarié mise en évidence par Benartzi et Thaler (2001).

The Role of Employee Stock Purchase Plans — Gift and Incentive? Evidence from a Multinational Corporation

AbstractEmployee share purchase plans (ESPPs) give free or discounted shares of stock to workers who buy shares in the hope that the greater share ownership will retain workers, build loyalty and raise productivity, as in gift exchange models. Using measures of workers’ organizational loyalty and sense of ownership in a multinational firm that puts the ESPP at the heart of its compensation policy, we find that workers who join the ESPP have lower turnover intentions and do less on‐the‐job search than others, motivated in part by gift exchange reciprocity, and also respond to the group incentive of ownership with greater work effort, longer hours, and lower absence rates. Workers in workplaces with high perceived rates of ESPP participation are more likely to intervene against shirkers. The results appear robust to the selectivity of who joins the ESPP. The mix of gifting shares to workers who buy shares and the group incentive of ownership makes ESPPs a unique dual form of compensation.

Learning from Coworkers: Peer Effects on Individual Investment Decisions

We use unique data on employee decisions in the employee stock purchase plans (ESPPs) of U.S. public firms to measure the influence of networks on investment decisions. Comparing only employees within a firm during the same election window and controlling for a metro area fixed effect, we find that the local choices of coworkers to participate in the firm’s ESPP exert a significant influence on employees’ own decisions to participate. Local coworkers’ trading patterns also disseminate to colleagues through the network. In the cross-section, we find that some employees (men, younger workers) are particularly susceptible to peer influence. Generally, we find that more similar employees exert greater influence on each other’s decisions and, particularly, that high (low) information employees are most affected by other high (low) information employees. However, we also find that the presence of high information employees magnifies the effects of peer networks. We trace a value-increasing investment choice through employee networks. Thus, our analysis suggests the potential of networks and targeted investor education to improve financial decision-making.

Do Nonexecutive Employees Have Valuable Information? Evidence from Employee Stock Purchase Plans

Using novel data on employee stock purchase plans (ESPPs), we show that aggregate purchases of company stock by lower-level employees predict future stock returns. Firms in the top quartile of ESPP purchases outperform those in the bottom quartile by 10% in the year after purchase. The relation between ESPP purchases and future stock returns is stronger for firms with high information asymmetry. Furthermore, we find that high ESPP purchases are associated with a lower likelihood of breaks in strings of consecutive earnings increases, as well as higher future sales growth and more innovation. These findings support the hypothesis that lower-level employees have information about future firm performance. We examine and reject a number of alternative explanations. Our results have implications for firms using employees as a source of capital, accounting issues related to expensing of equity-based compensation, and disclosure policy. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2015.2226 . This paper was accepted by Wei Jiang, finance.

Investor Experience and Attention: The Effect of Financial Shocks on Individual Trading Decisions

Using unique data on employee ownership plans sponsored by U.S. public companies, we estimate the effects of the 2008 financial crisis on individual investors’ participation and trading decisions. Consistent with a decreased willingness to take risk, we observe an increase in the average propensity to exercise employee stock options following the crisis, controlling for grant timing and moneyness in addition to time-invariant firm and employee characteristics. However, the results are concentrated among employees with limited experience in option plans prior to the pre-crisis run-up in equity prices. Moreover, we find that low-experience employees also increase their participation in employee stock purchase plans (ESPPs) following the shock. Conditional on initiating participation in ESPPs, we find that they are disproportionally likely to sell the acquired shares both immediately and within the first year of ownership. Since declining to participate in an ESPP amounts to leaving money on the table, our results suggest a new wrinkle in our understanding of how investors’ personal return experiences interact with risk preferences. While negative shocks appear to diminish investors’ appetites for risk, they also mitigate investor inattention. Thus, at least along certain dimensions, they can induce investors to make decisions that are closer to the optimum.

Understanding employee preferences for investing in employer stock: evidence from France

In this article, we broaden the focus of existing research on employee stock purchase plans by analysing employee preferences for investing in employer stock as a construct distinct from actual investment behaviour. In our analysis of original survey data in a sample of 900 employees in four French companies, we find that employee preferences are influenced by two common cognitive heuristics (representativeness and familiarity), organisational commitment, the perceived quality of corporate communications about these plans and perceived managerial commitment to employee ownership. We did not find, however, that risk aversion, turnover intentions or perceived employee involvement in decision making influenced preferences for investing in employer stock. Our findings have both theoretical and practical implications for understanding and operating these types of employee benefit plans, which are becoming more common across the globe.

Money Left on the Table: An Analysis of Participation in Employee Stock Purchase Plans

We analyze participation decisions in employee stock purchase plans. These plans allow employees to buy company stock at a discount from the market price and resell it immediately for a sure profit. Although an average employee stands to gain $3,079 annually, only 30% of individuals take advantage of this risk-free opportunity. Participation is more likely among employees who are familiar with stocks, are more educated, are less financially constrained, and make fewer errors in valuing financial securities. Our results suggest that compensation plans requiring active decisions by individuals can result in poor financial outcomes for employees of lower socioeconomic status.

Money Left on the Table: An Analysis of Participation in Employee Stock Purchase Plans

We analyze participation decisions in employee stock purchase plans. These plans allow employees to buy company stock at a discount from the market price and resell it immediately for a sure profit. Although an average employee stands to gain $3,079 annually, only 30% of individuals take advantage of this risk-free opportunity. Participation is more likely among employees who are familiar with stocks, are more educated, are less financially unconstrained, and make fewer errors in valuing financial securities. Our results suggest that compensation plans requiring active decisions by individuals can result in poor financial outcomes for employees of lower socioeconomic status.

Employee Stock Purchase Plans: Gift or Incentive? Evidence from a Multinational Corporation

Employee Stock Purchase Plans: Gift or Incentive? Evidence from a Multinational Corporation

Employee Stock Purchase Plans

Reports of renewed of interest in Employee Stock Purchase Plans have recently appeared, perhaps driven in part by the robust state of the stock market, that give a positive glow to these plans. But HR professionals should react with caution and carefully examine all aspects of these plans before enhancing or adopting one. Plans have recently been terminated and made less attractive to employees, and many companies have passed on the idea. Important data affecting plan design and employee participation have not been reported that contribute to a low level of interest. Involvement of major HR consultants is lacking and HR specialists appear to be in no hurry to champion these plans. Despite these factors, HR professionals should give these plans serious consideration because of their potential value for compensating employees in certain circumstances.

739P - Phase 1 Experience of Tivantinib in Patients with Hepatocellular Carcinoma (HCC) or Biliary Tract Cancer (BTC)

ABSTRACT Background Tivantinib is a selective MET inhibitor that is extensively metabolized by the liver. Since 2006, > 700 cancer patients (pts) have been treated with tivantinib. Herein we summarize safety, pharmacokinetic (PK), and efficacy data for pts with HCC or BTC treated with tivantinib in phase 1 clinical trials. Methods Adverse events (AEs) were assessed using Common Terminology Criteria for Adverse Events (CTCAE) version 3.0. Tumor responses were assessed via Response Evaluation Criteria in Solid Tumors (RECIST) version 1.1. PK parameters were calculated using blood samples collected on day 1 and on day 2 or day 15 of cycle 1. Results 53 pts (median age, 63 y) with HCC (n = 42; 79%), cholangiocarcinoma (n = 10; 19%), or gallbladder adenocarcinoma (n = 1; 2%) were included. Of these, 23 pts (43%) received tivantinib monotherapy, and 30 pts (57%) received tivantinib in combination with sorafenib (n = 20; 38%), gemcitabine (n = 8; 15%), or erlotinib (n = 2; 4%). Starting tivantinib BID doses were  Conclusions Tivantinib demonstrated a manageable safety profile and was well tolerated at doses up to 360 mg BID in pts with BTC and up to 240 mg BID in pts with HCC. Only pts with HCC had increased exposure, presumably due to disease-specific hepatic impairment. Encouraging clinical activity (primarily SD) was observed in this pt population. Disclosure F. Chai: F Chai is an employee of ArQule, Inc., the sponsor of the studies and holds ArQule stock. G. Abbadessa: G Abbadessa is an employee of ArQule, Inc. and owns ArQule stock options. R. Savage: R Savage is currently an employee of ArQule and participates in the ESPP employee stock purchase plan and receives stock options as part of his compensation package as an employee of ArQule. H. Zahir: H Zahir is an employee of Daiichi Sankyo, Inc. Y. Chen: Y Chen is an ArQule employee and own ArQule stocks. M. Lamar: M Lamar is an employee of ArQule, Inc. J. Kazakin: J Kazakin is an employee of ArQule, Inc. and has ArQule's stock options. D. Ferrari: D Ferrari is an ArQule Inc. employee and currently owns ArQule stock. R. von Roemeling: R von Roemeling is an employee of Daiichi Sankyo Pharma Development. B. Schwartz: B Schwartz is currently an employee of ArQule Inc. and own stock in the company.

Money Left on the Table: An Analysis of Participation in Employee Stock Purchase Plans

Money Left on the Table: An Analysis of Participation in Employee Stock Purchase Plans

Do Stated Corporate Stock Repurchase Motives Impact Stock Repurchase Plan Results? Part II – KLA-Tencor Case Study

Do well-conceived stock repurchase plan motives correlate with good stock repurchase plan results? Do ill-conceived stated motives correlate with poor results? KLA-Tencor states it initiated a stock repurchase plan “…to reduce the dilution from KLA-Tencor’s employee benefit and incentive plans such as the stock option and employee stock purchase plans.” However, using stock buybacks to offset options dilution is unlikely to maximize the profitability of a stock repurchase program. At best, such a directive will result in a company repurchasing shares at the average price during a given period, and the directive may easily be interpreted in a fashion that causes a company to repurchase shares at far above the average price over time. Certainly, for the moment, the raw performance of KLA-Tencor’s stock repurchase program leaves something to be desired. From FY00 through FY10, KLA-Tencor paid $3.139 billion to repurchase 68.7 million shares at $45.69 apiece. Now trading at $32.81 apiece, KLA-Tencor’s buybacks during this period generated an $884.9 million economic loss, 28.2% of the cash invested, before consideration of foregone interest income. Absent buybacks, KLA-Tencor’s shares today would be trading more than 16.1% higher. Selling shareholders may have benefitted from KLA-Tencor’s buybacks, but, so far, ongoing shareholders definitely have not.As in an earlier study of National Semiconductor, KLA-Tencor’s stated buyback objectives (“offset dilution”, “distribute cash”) in combination with its buyback program’s subsequent raw performance (246th best among 276 companies surveyed) raise the question of whether ill-conceived stated motives for corporate stock repurchase programs correlate with poor stock repurchase program results. Do companies as a group run less effective stock repurchase programs when they cite “improve return on capital”, or “offset options dilution”, or “reduce excess cash” as operative buyback motives rather than a more logical goal – “repurchase undervalued shares”? Ideally, analysis of a company’s buyback program should consider adjusted performance, not just raw performance. The outline for a more definitive study is described.