NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Employee Stock Ownership Plans and Corporate Restructuring: Myths and Realities

Myron S. Scholes, Mark A. Wolfson

NBER Working Paper No. 3094*
Issued in September 1989
NBER Program(s):   PE    ME

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.

*Published: Financial Management, Spring 1990.

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