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.

Hedge Strategy Analysis and Financial Analysis of Yunnan Baiyao

Plenty of companies actively employ financial instruments to hedge looming risks. Although hedging may reduce risks such as exchange rate risk and potential price risk, hedging is also likely to make companies suffer from loss. Options, one of the financial derivatives, bring holders rights instead of obligation to buy or sell the underlying asset at a fixed price. In 2020, Yunnan Baiyao declared that the group intended to conduct stock buybacks hedge the stock price risk of its repurchase plan. The cost of buyback was reduced in that this repurchase plan was combined with OTC put options. Yunnan Baiyao is the leading company in the pharmaceutical and health industry and its market value reached ￥134.24bn which ranked second among its peers as of 2021. Based on this stock purchase plan of Yunnan Baiyao, this article aims to analyze the financial situation of the company and the application of put options in the plan.

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

Homemade equity offerings via dividend reinvestment and stock purchase plans

This paper investigates equity issuances through dividend reinvestment and stock purchase plans (DRSPPs). Using a unique sample collected from security registration filings, we show that firms can issue new shares through DRSPPs without using underwriters and consequently, save a large part of direct costs. This economical form of equity offering helps high dividend paying firms retain a substantial amount of cash flow from operations. With this innovative strategic practice of capital-raising, we provide direct evidence showing that the pecking order still drives firms' financing. Furthermore, equity offerings via DRSPPs can avoid negative stock market reactions around the issuance date.

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.

Programy automatycznej reinwestycji dywidendy jako instrument polityki wypłaty dywidendy w spółce akcyjnej

<p><strong>Uzasadnienie teoretyczne</strong>: Zagadnienie programów automatycznej reinwestycji dywidendy jest rzadko poruszane w polskiej literaturze, brak jest całościowych opracowań dotyczących programów automatycznej reinwestycji dywidendy. Zagadnienie to najczęściej pojawia się przy omawianiu narzędzi polityki dywidendy.</p><p><strong>Cel artykułu</strong>: Przedstawienie założeń programów (planów) automatycznej reinwestycji dywidendy, które mogą stanowić narzędzie polityki wypłaty dywidendy w spółce akcyjnej, a także dokonanie analizy programów automatycznej reinwestycji dywidendy oferowanych przez 30 amerykańskich spółek reprezentujących Dow Jones Industrial Average Index.</p><p><strong>Metody badawcze</strong>: W opracowaniu wykorzystano jako metody badawcze analizę literatury oraz analizę dokumentów (broszur) opisujących programy automatycznej reinwestycji dywidendy.</p><p><strong>Główne wnioski</strong>: Programy automatycznej reinwestycji dywidendy zostały wdrożone przez wszystkie spółki wchodzące w skład Dow Jones Industrial Average Index. Znaczna część analizowanych programów zalicza się do grupy tzw. bezpłatnych programów reinwestycji dywidendy (<em>No-Fee Dividend Reinvestment Programs</em>). Z dokonanych obserwacji wynika, że często programy automatycznej reinwestycji dywidendy uzupełniane są o dodatkowe programy zakupu akcji, określane jako <em>Optional Cash Purchase Plans</em> (OCPs) lub <em>Stock Purchase Plans</em> (SPPs).</p>

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.

Life cycle cost as a criterion in purchase of rolling stock

The key parameter in assessing the economic viability of purchasing and operating rolling stock is the total cost incurred by the ordering party, starting from the preparation of the rolling stock purchase plan to the end of its operation, including its disposal. The methodology for calculating these life cycle costs (LCCs) has been developed especially in recent years based on the experience of the next-generation vehicle deployment. In Poland first vehicles purchase using the LCC method was carried out in few recent years - by PKP Intercity and by Lodz Agglomeration Railway. Despite the use of simplified criteria for the economic efficiency of vehicles, optimal offers were selected. This article describes examples of rolling stock purchase based on the low cost of life of the vehicle and the economic and operational results that have been achieved after several years of operation. Further possibilities for optimizing these costs were also indicated. Examples showing the proportion between the cost of vehicle purchase, its technical maintenance and its operation, where the electricity consumption is the main factor are given.

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