Examining structure and process in ESOP firms

Purpose – To examine the role of three employee‐owner attributes (i.e. the level of employee influence in decision making, the amount of Employee Stock Ownership Plan (ESOP) information given to employee‐owners, and the extent to which the ESOP design provides employee‐owners with equity possession) in predicting variance in managerial perceptions of ESOP firm performance. Design/methodology/approach – Survey responses from management at 61 ESOP firms in the United States are analyzed. Based upon the ESOP literature, “ownership” is conceptualized as a multidimensional construct consisting of rights to influence, information, and equity. This framework is the foundation for several hypotheses linking ownership attributes and firm performance. Findings – Utilizing hierarchical regression analysis, we found that employee influence in operational decisions and information sharing with employee‐owners has a positive impact on managerial perceptions of firm performance. Equity possession appears to be only significant when ESOP information sharing with is low. Research limitations/implications – This is a cross‐sectional study of management respondents. Future researchers should include employees and managers, gather objective firm performance data, and refine the measures of employee influence, information sharing, and equity possession. Practical implications – Managers interested in improving the economic performance of ESOP firms should increase opportunities for employee operational influence, as well as developing extensive ESOP communication programs. Policy makers may need to provide stronger guidance to employers regarding employee‐owner equity possession. Originality/value – This paper furthers our understanding of the role that employee ownership attributes play in ESOP firm effectiveness.