Research on Employee Sentiment and Employee Stock Ownership Plan

Employee stock ownership plans have undergone many changes in China. This paper examines how employee optimism affects their participation in ESOP. Using the annualized stock return to characterize the employee sentiment, our results based on the Chinese listed firms that have carried out ESOP throughout 2014-2020 show that employee optimism promotes participation in ESOP. Moreover, our cross-sectional analyses show that this effect is more significant in firms whose employees have a lower level of education or salary. Further, we find that ESOP with sufficient employee participation has a positive implication, leading to more corporate innovation and the increased quality of information disclosure. This paper expands the application range of employee sentiment from option plans to ESOP. Secondly, it provides a further understanding of ESOP from the perspective of employees and supplements this part of the literature. Besides, it has a certain guiding significance for improving the design of the employee stock ownership plan system and promoting enterprises.