A Study of the Relationships between Employee Stock Ownership Plans and Corporate Performance

• Main Author: Robinson, Robert K. (Robert Kirkland)
• Other Authors: Stephens, Elvis C.
• Format: Others
• Language: English
• Published: University of North Texas 1988
• Subjects: employee stock ownership plans; corporate performance; financial data; employee-owned firms; traditionally-owned firms; Employee ownership.; Labor turnover.; Industrial productivity.; Corporate profits.
• Online Access: https://digital.library.unt.edu/ark:/67531/metadc332236/

This work collected four years of financial data from an employee-owned firm and a traditionally-owned firm from the same industry. The data were then organized to provide measures of three dimensions of corporate performance: (1) employee turnover, (2) productivity, and (3) profitability. Based upon a review of the literature, employee stock ownership plans (ESOP) are reported to enhance corporate performance after their adoption. Additionally, ESOPs are purported to perform better than traditionally-owned companies. This dissertation developed hypotheses to ascertain whether or not the particular ESOP used in this study conformed to these expectations. The first set of three hypotheses was tested using multiple regression techniques to determine if the ESOP experienced a reduction in turnover, an improvement in productivity, and an increase in profitability following its conversion to employee-ownership. The results of the regressions found that there was no incremental significance. There was no improvement noted in the performance of the ESOP firm. Another component of this investigation was to determine whether improvements in corporate performance were temporary or permanent phenomena. This portion of the research was rendered superfluous when no improvements were available for analysis. The final question that was examined was whether the ESOP would demonstrate better performance than a traditionally-owned control firm during the post-intrusion period. There was no significant difference discovered in productivity and profitability. A marked difference was identified in terms of turnover. However, it was the traditionally-owned firm which performed better than the employee-owned firm—the opposite of what was predicted. These findings, although interesting, had to be evaluated as inconclusive because of innate differences between the treatment and control firms. The variance between the two companies may be attributed to such factors as company size and marked differences in their respective labor markets. The ESOP used in this study did not demonstrate any of the changes in performance that had been predicted.