Employee Stock Ownership Plans and Corporate Restructuring: Myths and Realities

30 Pages Posted: 10 Feb 2001 Last revised: 17 Dec 2022

See all articles by Myron S. Scholes

Myron S. Scholes

Stanford Graduate School of Business; Platinum Grove Asset Management L.P.; Oak Hill Platinum Partners, LLC

Mark A. Wolfson

Stanford Graduate School of Business

Date Written: September 1989

Abstract

During the first six months of 1989 U.s. corporations acquired over $19 billion of their own stock to establish employer stock ownership plans (ESOPs). We evaluate the common claims that there exist unique tax and incentive contracting advantages to establishing ESOPs. Our analysis suggests that, particularly for large firms, where the greatest growth in ESOPs has occurred, the case is very weak for taxes being the primary motivation to establish an ESOP. The case is also weak for employee incentives being the driving force behind their establishment. We conclude that the main motivation for the growth of ESOPs is their anti-takeover characteristics.

Suggested Citation

Scholes, Myron S. and Scholes, Myron S. and Wolfson, Mark A., Employee Stock Ownership Plans and Corporate Restructuring: Myths and Realities (September 1989). NBER Working Paper No. w3094, Available at SSRN: https://ssrn.com/abstract=242129

Myron S. Scholes (Contact Author)

Stanford Graduate School of Business ( email )

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Platinum Grove Asset Management L.P. ( email )

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Oak Hill Platinum Partners, LLC ( email )

1100 King Street, Building 4
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Mark A. Wolfson

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
(650) 723-0311 (Phone)
(650) 723-4010 (Fax)

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