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

Ilona Babenka, Rik Sen

Research output: Contribution to journalReview articlepeer-review

10 Scopus citations

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

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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