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Shows lower stock price crash risk in firms with increased employee stock ownership, suggesting enhanced managerial accountability.
Using data from South Korean public firms, we investigate the relationship between employee stock ownership (ESO) and stock price crash risk. We find that firms with higher ESO levels are associated with lower stock price crash risk. Moreover, employee ownership is related to less managerial bad‐news hoarding behaviour and greater transparency in corporate governance. This negative association is particularly more pronounced when the largest shareholder's ownership is low or when analyst coverage is high. We further demonstrate that ESO is associated with higher financial reporting quality and greater employee bargaining power in salary negotiations.
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Jung et al. (2026) studied this question.
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