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Bank Employee Incentives and Stock Purchase Plans Participation
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Bank Employee Incentives and Stock Purchase Plans Participation

Author

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  • Thomas Rapp

    (LIRAES - EA 4470 - Laboratoire Interdisciplinaire de Recherche Appliquée en Economie de la Santé - UPD5 - Université Paris Descartes - Paris 5)

  • Nicolas Aubert

    (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon)

Abstract

We investigate which factors influence 44,649 employees' decision to invest in a top retail banking group in France. We have two objectives: (i) to explore factors associated with the amount invested in the plan, and (ii) to explore whether these factors have same associations with the probability of investing more than the incentive pay i.e. being an active investor. Specifically, we focus on four parameters that have been shown to affect participation: liquidity constraints, imperfect knowledge of the plan, asset choice, and transaction costs. We confirm Engelhardt and Madrian (Natl Tax J 57:385–406, 2004) assumptions according to which such factors contribute to explain non-participation. We show that ESPP contributors have very specific and unobserved motivations, as shown with the positive correlations between error terms in the two steps of investment decisions. The existence of unobservable investment motives can be explained by a lower risk aversion, a higher time preference, or a strong willingness to participate to corporate governance.

Suggested Citation

  • Thomas Rapp & Nicolas Aubert, 2011. "Bank Employee Incentives and Stock Purchase Plans Participation," Post-Print halshs-01256781, HAL.
    • Handle: RePEc:hal:journl:halshs-01256781
    DOI: 10.1007/s10693-011-0104-0
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01256781
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    Cited by:

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    3. Nicolas Aubert & Xavier Hollandts, 2015. "How Shared Capitalism Affects Employee Withdrawal: An Econometric Case Study Of A French-Listed Company," Post-Print halshs-01256759, HAL.
    4. Pendleton, Andrew & Robinson, Andrew, 2021. "Why walk away from an easy gain in wealth? Evidence from a UK stock option plan," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    5. Zaheer Ahmed & Umara Noreen & Suresh A.L. Ramakrishnan & Dewi Fariha Binti Abdullah, 2021. "What explains the investment decision-making behaviour? The role of financial literacy and financial risk tolerance," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 11(1), pages 1-19.
    6. Ann Yang, 2013. "Decision Making for Individual Investors: A Measurement of Latent Difficulties," Journal of Financial Services Research, Springer;Western Finance Association, vol. 44(3), pages 303-329, December.
    7. Xavier Hollandts & Nicolas Aubert & Abdelmehdi Ben Abdelhamid & Victor Prieur, 2018. "Beyond Dichotomy: The Curvilinear Impact of Employee Ownership on CEO entrenchment," Post-Print halshs-01495427, HAL.
    8. Xavier Hollandts & Nicolas Aubert & Abdelmehdi Abdelhamid & Victor Prieur, 2017. "Beyond Dichotomy: The Curvilinear Impact of Employee Ownership on CEO entrenchment," Working Papers halshs-01495427, HAL.

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    More about this item

    Keywords

    Household Finance; employee stock purchase plan;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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