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RESEARCH PRODUCT

The determinants of employees’ investments in their company share

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Our research is motivated by an observation. Employee Ownership is a form of savings that is becoming moreand more sought after these days. The concentration of the employee savings into employee ownership isbecoming stronger. These evolutions translate into a fact: employees facing a savings menu tend to chooseEmployee Ownership. The high exposure to risk of the employee-shareholders might have some consequence fortheir assets and their job. For companies, the cost of this exposure to risk can also be high. These observationshave led us to wonder about the causes of employees’ investments in their company stock. Thus, this researchtries to answer the question: Which are determinants of employees’ investments in their employer’s stock? We will specifically focus on the case of Employee Ownership in the French company savings plan (PEE). We can find several results through the empirical study. The exploratory phase shows the influence of the French legal system on the investment choice of employees. It makes it possible to identify four groups of determinantsof employees’ investment in their company stock: the employee stock purchase plans, the context of employeesavings, the company’s and the employees’ characteristics. Concerning the results of the quantitative analysis,they deal with the effect of several dependent variables on three dimensions of the employee investment decisionof a company that is quoted on the stock exchange. We first of all analyze the decision of participating in theemployee stock purchase plan. For those employees who have subscribed to the employee stock purchase plan,we will then study the determinants of the amount invested. The dependent variable is the total amount of thesubscription to the company’s stocks. Finally, we analyse the relationship between the dependent variables andthe exposure to employee ownership. The dependent variable is thus the percentage of the total employeesavings invested in employer’s stocks after the employee stock purchase plan. Most of the obtained results are significant and similar for the three decisions that have been considered (the participation, the intensity of theparticipation and the concentration of savings into employee ownership). However, some results divergeindicating the different nature of three decisions that have been analyzed.