Employee Stock Ownership Plans and Corporate Restructuring: Myths and Realities
Myron S. Scholes
Mark A. Wolfson
billion of their own stock to establish employer stock ownership plans
(ESOPs). We evaluate the common claims that there exist unique tax and
incentive contracting advantages to establishing ESOPs. Our analysis suggests
that, particularly for large firms, where the greatest growth in ESOPs has
occurred, the case is very weak for taxes being the primary motivation to
establish an ESOP. The case is also weak for employee incentives being the
driving force behind their establishment. We conclude that the main
motivation for the growth of ESOPs is their anti-takeover characteristics.
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