Sustainability of employee ownership: the role of capital structure in ESOP plan terminations

What the paper says

Purpose The paper studies the relationship between central features of the capital structure and terminations of ESOP plans in the US. Design/methodology/approach The research methodology is primarily based on reviewing the existing literature and includes elements of original comparative analysis. Findings We find that externally imposed repurchase obligation, the stochastic element to repurchase obligation and the discontinuous vesting of ICA shares undermines the sustainability of employee ownership in the Employee Stock Ownership Plan model. Research limitations/implications Strengthening employee-owned firm the structural architecture of employee-owned firms (EOF) can help to improve sustainability of the socially preferable alternative in the market economy. Practical implications In light of the increasing global interest in employee ownership, our research underscores the need for institutional learning to adapt EOFs to contemporary economic environments. Social implications Strengthening employee-owned firm the structural architecture of employee-owned firms (EOF) can help to build the case for the socially preferrable business ownership model for the market economy. Originality/value This paper contributes to the employee ownership literature by providing understanding of the role of capital structure in the US ESOP model and terminations of ESOP plans and suggesting some novel ideas in addressing the challenges.