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 language | English (US) |
|---|---|
| Pages (from-to) | 3658-3698 |
| Number of pages | 41 |
| Journal | Review of Financial Studies |
| Volume | 27 |
| Issue number | 12 |
| DOIs | |
| State | Published - Dec 1 2014 |
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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 journal › Article
}
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.
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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 -