No Fable this: A Theory of Esops

Posted: 31 Oct 2000

See all articles by Paul Clyde

Paul Clyde

University of Michigan, Stephen M. Ross School of Business; William Davidson Institute at the University of Michigan

Kevin R. James

London School of Economics & Political Science (LSE) - Systemic Risk Centre

Abstract

Recent advances in takeover technology have diminished the value of implicit contracts between management and employees which secure the employees' specific investments. Absent such security rational employees will reduce the amount of specific investments they make. Firms which value investments in firm-specific human capital have the inventive to develop mechanisms to restore employees' confidence that they will be allowed to earn a return on their firm-specific human capital. We contend that ESOPs are one such mechanism. Consistent with this theory, we find that proxies for firm specific investments are positively related to the probability a firm has a large ESOP.

JEL Classification: G32

Suggested Citation

Clyde, Paul and James, Kevin Roger, No Fable this: A Theory of Esops. Available at SSRN: https://ssrn.com/abstract=6002

Paul Clyde (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan
Ann Arbor, MI 48109-1234
United States
734-764-8008 (Phone)

HOME PAGE: http://webuser.bus.umich.edu/departments/busecon/f

William Davidson Institute at the University of Michigan ( email )

701 Tappan
Ann Arbor, MI 48109-1234
United States
734-764-8008 (Phone)

HOME PAGE: http://webuser.bus.umich.edu/departments/busecon/f

Kevin Roger James

London School of Economics & Political Science (LSE) - Systemic Risk Centre ( email )

Houghton St
London
United Kingdom

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