Money left on the table: An analysis of participation in employee stock purchase plans

Ilona Babenka, Rik Sen

Research output: Contribution to journalArticle

7 Citations (Scopus)

Abstract

We analyze participation decisions in employee stock purchase plans. These plans allow employees to buy company stock at a discount from the market price and resell it immediately for a sure profit. Although an average employee stands to gain $3,079 annually, only 30% of individuals take advantage of this risk-free opportunity. Participation is more likely among employees who are familiar with stocks, are more educated, are less financially constrained, and make fewer errors in valuing financial securities. Our results suggest that compensation plans requiring active decisions by individuals can result in poor financial outcomes for employees of lower socioeconomic status.

Original languageEnglish (US)
Pages (from-to)3658-3698
Number of pages41
JournalReview of Financial Studies
Volume27
Issue number12
DOIs
StatePublished - Dec 1 2014

Fingerprint

Employees
Purchase
Participation
Discount
Financial security
Market price
Socioeconomic status
Profit

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

Cite this

Money left on the table : An analysis of participation in employee stock purchase plans. / Babenka, Ilona; Sen, Rik.

In: Review of Financial Studies, Vol. 27, No. 12, 01.12.2014, p. 3658-3698.

Research output: Contribution to journalArticle

@article{c3e3eb850b254e28806254bf5f57a806,
title = "Money left on the table: An analysis of participation in employee stock purchase plans",
abstract = "We analyze participation decisions in employee stock purchase plans. These plans allow employees to buy company stock at a discount from the market price and resell it immediately for a sure profit. Although an average employee stands to gain $3,079 annually, only 30{\%} of individuals take advantage of this risk-free opportunity. Participation is more likely among employees who are familiar with stocks, are more educated, are less financially constrained, and make fewer errors in valuing financial securities. Our results suggest that compensation plans requiring active decisions by individuals can result in poor financial outcomes for employees of lower socioeconomic status.",
author = "Ilona Babenka and Rik Sen",
year = "2014",
month = "12",
day = "1",
doi = "10.1093/rfs/hhu050",
language = "English (US)",
volume = "27",
pages = "3658--3698",
journal = "Review of Financial Studies",
issn = "0893-9454",
publisher = "Oxford University Press",
number = "12",

}

TY - JOUR

T1 - Money left on the table

T2 - An analysis of participation in employee stock purchase plans

AU - Babenka, Ilona

AU - Sen, Rik

PY - 2014/12/1

Y1 - 2014/12/1

N2 - We analyze participation decisions in employee stock purchase plans. These plans allow employees to buy company stock at a discount from the market price and resell it immediately for a sure profit. Although an average employee stands to gain $3,079 annually, only 30% of individuals take advantage of this risk-free opportunity. Participation is more likely among employees who are familiar with stocks, are more educated, are less financially constrained, and make fewer errors in valuing financial securities. Our results suggest that compensation plans requiring active decisions by individuals can result in poor financial outcomes for employees of lower socioeconomic status.

AB - We analyze participation decisions in employee stock purchase plans. These plans allow employees to buy company stock at a discount from the market price and resell it immediately for a sure profit. Although an average employee stands to gain $3,079 annually, only 30% of individuals take advantage of this risk-free opportunity. Participation is more likely among employees who are familiar with stocks, are more educated, are less financially constrained, and make fewer errors in valuing financial securities. Our results suggest that compensation plans requiring active decisions by individuals can result in poor financial outcomes for employees of lower socioeconomic status.

UR - http://www.scopus.com/inward/record.url?scp=84924588936&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84924588936&partnerID=8YFLogxK

U2 - 10.1093/rfs/hhu050

DO - 10.1093/rfs/hhu050

M3 - Article

AN - SCOPUS:84924588936

VL - 27

SP - 3658

EP - 3698

JO - Review of Financial Studies

JF - Review of Financial Studies

SN - 0893-9454

IS - 12

ER -