Selling Company Shares to Reluctant Employees: France Telecom's Experience

61 Pages Posted: 13 Jun 2000

See all articles by Francois Degeorge

Francois Degeorge

University of Lugano - Faculty of Economics; Swiss Finance Institute; European Corporate Governance Institute (ECGI)

Dirk Jenter

London School of Economics & Political Science (LSE) - Department of Finance; Centre for Economic Policy Research (CEPR)

Alberto Moel

Monitor Corporate Finance, Monitor Group

Peter Tufano

University of Oxford - Said Business School; National Bureau of Economic Research (NBER); University of Oxford - Said Business School

Multiple version iconThere are 2 versions of this paper

Date Written: December 2002

Abstract

In 1997, France Telecom, the state-owned French telephone company, went through a partial privatization. We adapt a standard neoclassical model to predict how employees might respond to the firm's offer to sell them various classes of shares. Using a database that tracks over 200,000 eligible participants, we analyze employees' decisions whether to participate; how much to invest; and what form of stock alternatives they selected. The results are broadly consistent with the neoclassical model. However, we report four anomalous findings: (1) The firm specificity of human capital has a negligible effect on employees' investment decisions; (2) the amount of funds invested in the stock plans seems driven by a different set of forces than the decision to participate, which we suspect reflects a "threshold effect" that we attempt to measure; (3) employees "left on the table" benefits equal to one to two month's salary by failing to participate; and (4) most participants underweighted the most valuable asset.

Keywords: Employee Stock Ownership, Privatization, Portfolio Choice

JEL Classification: G30, G11, L33

Suggested Citation

Degeorge, Francois and Jenter, Dirk and Moel, Alberto and Tufano, Peter, Selling Company Shares to Reluctant Employees: France Telecom's Experience (December 2002). FEEM Working Paper No. 111.2002. Available at SSRN: https://ssrn.com/abstract=223794 or http://dx.doi.org/10.2139/ssrn.223794

Francois Degeorge

University of Lugano - Faculty of Economics ( email )

via Giuseppe Buffi 13
CH-6904 Lugano
Switzerland
41 58 666 4634 (Phone)
41 58 666 4647 (Fax)

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Dirk Jenter

London School of Economics & Political Science (LSE) - Department of Finance ( email )

United Kingdom

HOME PAGE: http://personal.lse.ac.uk/jenter/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Alberto Moel

Monitor Corporate Finance, Monitor Group ( email )

Two Canal Park
Cambridge, MA 02141
United States

Peter Tufano (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0) 1865 288551 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0) 1865 288551 (Phone)

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