| Author: | Gordon, L. A. Pound, J. |
| Title: | ESOPs and corporate control |
| Journal: | Journal of Financial Economics
1990 : OCT, VOL. 27:2, p. 525-555 |
| Index terms: | EMPLOYEE STOCK OWNERSHIP SHARE VALUATION COMPANY CONTROL |
| Language: | eng |
| Abstract: | The effects of employee stock ownership plans (ESOPs) on shareholder wealth are examined. ESOPs established in the presence of takeover activity reduce share values, by approximately 4 percent on average. ESOPs also reduce share values if they are structured to transfer control away from outside shareholders, by creating a new ownership block with veto power over takeover bids. Large ESOPs established with nonvoting stock, so as to preclude any immediate control transfers, result in a significant increase in share values. The wealth effect of any given ESOP thus depends upon both its incentive and control effects on the corporation. |
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