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| Research on the Impact of Employee Stock Ownership Plans on Stock Price Crash Risk: From Policy Design Perspective |
| GUAN Yueqin，YU Xiaohong，LI Jingjing，XIN Yu |
| 1. Nanjing Forestry University, Nanjing, China; 2. Harbin Institute of Technology, Shenzhen, Guangdong, China; 3. Sun Yat-sen University, Guangzhou, China |
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Abstract Based on the agency theory and policy design perspective, this study investigates the influence and mechanism of employee stock ownership plans (ESOPs) on firms’ future stock price crash risk. The empirical results show that the firms’ implemented ESOPs have higher future stock price crash risk, supporting the agency hypothesis. The underlying mechanisms from policy design perspective is further explained. The results show that managements and large shareholders have incentives to hold bad news due to the unique policy design characteristics of current ESOP regulations, leading to higher future stock price crash risks. Furthermore, it is found that the positive relationship between ESOPs and crash risk is more pronounced in non-state-owned enterprises and firms with lower internal control quality.
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Received: 26 September 2021
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