Employee Stock Ownership Plans and Corporate Environmental Engagement

36 Pages Posted: 3 Sep 2021

See all articles by Dongmin Kong

Dongmin Kong

School of Economics, Huazhong University of Science and Technology

Yanan Wang

Zhongnan University of Economics and Law; Zhongnan University of Economics and Law

Date Written: September 1, 2021

Abstract

This study examines the impact of non-executive employee stock ownership plans (ESOPs) on corporate environmental engagement. We show that granting ESOPs to non-executive employees promotes greater corporate environmental engagement in terms of environmental protection expenditures, environmental information disclosure, and environmental, social, and governance (ESG) ratings. We adopt the two-way fixed-effects model, the propensity score matching (PSM) method, and the instrumental variable approach to alleviate endogeneity concerns. The positive effect of ESOPs is mainly attributable to high-intensity, broad-based, and long-term plans where the incentive effect of ESOPs is sufficiently large to offset the free-rider effect. Furthermore, our findings are particularly pronounced in companies with more intense labor market competition, companies with greater media exposure, and companies in heavy-polluting industries. Overall, this study reveals new evidence of the incentive effect of ESOPs on corporate environmental engagement.

Keywords: Employee incentives, Corporate environmental engagement, Stakeholder

JEL Classification: G30, J54, Q50

Suggested Citation

Kong, Dongmin and Wang, Yanan and Wang, Yanan, Employee Stock Ownership Plans and Corporate Environmental Engagement (September 1, 2021). Available at SSRN: https://ssrn.com/abstract=3915366 or http://dx.doi.org/10.2139/ssrn.3915366

Dongmin Kong

School of Economics, Huazhong University of Science and Technology ( email )

Bldg. of Econ. School, Louyu Rd. 1037#
HUST, Hongshan Dist.
Wuhan, Hubei 430074
China

Yanan Wang (Contact Author)

Zhongnan University of Economics and Law ( email )

WenQuan Building, 182# Nanhu Avenue
Wuhan, Hubei 430073
China

Zhongnan University of Economics and Law ( email )

WenQuan Building, 182# Nanhu Avenue
Wuhan, Hubei 430073
China

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