DescriptionThe past decades have witnessed overall growth in broad-based employee stock ownership plans among U.S. firms. However, in recent years ESOP growth has stagnated, and there has been limited research on why firms pursue employee ownership. This study revisits earlier work on predictors of employee ownership, expanding on previous studies that focus on firm-level predictors. I investigate whether industry characteristics can explain firm decisions to adopt employee stock ownership plans (ESOPs), exploring a critical variable of interest with important consequences for society: product market concentration.
I find that product market concentration, a proxy for firm market power, is indeed, a positive predictor, explaining inter-industry differences in ESOP prevalence. This study makes a unique contribution by using industry panel data to examine the extent to which product market concentration and other industry characteristics predict ESOP adoption, pushing the boundaries of current thinking on firm motives and environmental conditions predictive of firm ESOP adoption.