ESOP Shocks: Employee Ownership and Employment Stability in Public Firms During the COVID-19 Crisis

Author

Richard Taylor LennoxFollow

Year of Award

2024

Document Type

Thesis

Degree Type

Master of Arts (MA)

Degree Name

Economics

Department or School/College

Economics

Committee Chair

Dr. Derek Kellneberg

Commitee Members

Dr. Amanda Dawsey, Dr. Gregory Larson

Keywords

Employee Ownership, ESOP, Public Firms, Employment Stability

Subject Categories

Econometrics | Industrial Organization | Labor Economics | Political Economy

Abstract

Did employee ownership preserve jobs and firm-level skill retention during the COVID-19 pandemic? In the United States, employee ownership (EO) primarily takes the form of Employee Stock Ownership Plans (ESOPs). Using a longitudinal dataset composed of Department of Labor Form 5500 – CompuStat Fundamentals matched data from 2010-2022, this thesis examines the relationship between ESOPs and employment stability during the COVID pandemic for a large sample of public firms in the US. A fixed effects specification, controlling for a vector of firm characteristics and the national employment-to-population ratio, suggests that ESOPs had an employment-cushioning effect in public firms during the COVID-19 labor shock, with 2.5-5% higher average employee retention during the negative labor shock in 2020 compared to firms without ESOPs. This job-stability premium did not seem to persist in 2021, except for in firms with more than 10,000 employees, as government and financial intervention spurred a relatively quick, though industry-specific, economic recovery. However, in 2022, ESOPs are again associated with a job-growth premium across the board, displaying hiring rates an average 2% higher than firms without ESOPs. The size and sector of a firm seemed to partially determine the magnitude and significance of the ESOP’s stabilizing effect, with larger and more industrial firms seeing the most notable associations, though the correlation is evident across the sample. This labor-shock-absorbing relationship may have important implications for retaining firm-specific human capital through labor shocks, as well as for policymakers looking to preserve jobs during recessions and cut unemployment and welfare costs.

Recommended Citation

Lennox, Richard Taylor, "ESOP Shocks: Employee Ownership and Employment Stability in Public Firms During the COVID-19 Crisis" (2024). Graduate Student Theses, Dissertations, & Professional Papers. 12334.
https://scholarworks.umt.edu/etd/12334