Employee ownership as a signal of management quality

Nicolas Aubert (1) , André Lapied (2) , Patrick Rousseau (3)

1 DEFI - Centre de recherche en développement économique et finance internationale
2 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille
3 CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille

The employees' decision to become shareholder of the company they work for can be a consequence of employers' matching contribution in company stock. From a behavioral perspective, employees would regard these contributions as an implicit investment advice made by their employer. This paper adopts another viewpoint. Since employee ownership can be used as an entrenchment mechanism, we suggest that employer's matching policy can be considered as an imperfect signal of management quality. This paper suggests that employee ownership can be used by managers to compensate their management skills to the market. It recommends that employee ownership policy should not be influenced by the managers.

Mots clés: Employee ownership; corporate governance; management entrenchment

Domaines: Economies et finances

Nicolas Aubert, André Lapied, Patrick Rousseau. Employee ownership as a signal of management quality. 2010. ⟨halshs-00534025⟩