Employee stock ownership and financial performance in European countries: The moderating effects of uncertainty avoidance and social trust

Abstract

This study investigates how the effect of employee stock ownership on financial performance may hinge on the diverse cultural and societal contexts of European countries. Based on agency and national culture theories, we hypothesize that the positive relationship between employee stock ownership and return on assets (ROA) is stronger in those nations with lower uncertainty avoidance and higher social trust. Using a multisource, time‐lagged, large‐scale dataset of 1,741 firms from 21 countries in Europe, our multilevel, random coefficient modeling analysis found evidence for these hypotheses, suggesting that uncertainty avoidance and social trust serve as important contextual cues in predicting the linkage between employee stock ownership and financial performance. Our supplemental analysis with distinction between the managerial and nonmanagerial employee stock ownership further indicates managerial employee stock ownership has a direct positive effect on ROA. Although nonmanagerial employee stock ownership had a nonsignificant association with ROA, the relationship was positive and significant when uncertainty avoidance was low and social trust was high. This research contributes to the existing literature by illuminating some of the contextual influences altering the effectiveness of employee stock ownership. Our findings also offer practical suggestions for effectively using employee stock ownership.

Non-executive employee ownership and financial reporting quality: evidence from Europe

“…However, prior literature such as Bova et al (2015b) and Chen et al (2020) has concluded that employee ownership is large enough to drive employee incentives and affect corporate policies. The preponderance of prior empirical research finds positive association between non-executive employee ownership and both firm performance and innovation, supporting the view that employee shareholding aligns the interests of employees with those of other shareholders (Chang et al 2015;Kim and Patel 2017;Kang and Kim 2019). Bova et al (2015a) report that firms tend to disclose more information when employees have larger stakes in the firm.…”

I am therefore I own: Implications of organization‐based identity for employee stock ownership

“…Given the prevalence of these stock purchase plans, it is somewhat surprising that academic research seeking to answer questions about the impact of such plans on employees and employers has been slow to emerge. However, a recent special issue of Human Resource Management is an indication of increasing scholarly interest in the topic (Basterretxea, Heras‐Saizarbitoria, & Lertxundi, ; Kang & Kim, ; Kim & Han, ). Despite these recent advancements, very little is known about the determinants of an employee's decision to participate in a stock purchase plan and the inherent risk borne by employees.…”

Darbuotojų Finansinio Dalyvavimo Lietuvoje Raida Ir Formos: Įmonių Akcijų Ir Pelno Pasidalijimo Programos Bei Priemonės

“…Akademiniame lauke ryški tyrimų tematika, kurioje nustatomas ryšys tarp darbuotojų nuosavybės ir įmonės veiklos veiksmingumo (Kim, Patel, 2017). Dalis atliktų empirinių tyrimų atskleidė ryšius tarp įmonės veiklos rezultatų (darbuotojų produktyvumas, finansiniai rezultatai, personalo valdymo stabilumas) ir darbuotojų finansinio dalyvavimo (Kang, Kim, 2019;Kurtulus, Kruse, 2018;Richter, Schrader, 2017;Whitfield ir kt., 2017).…”