Document Type
Article
Language
eng
Publication Date
9-26-2018
Publisher
Wiley
Source Publication
Human Resource Management
Source ISSN
0090-4848
Abstract
This study investigates how the effect of employee stock ownership on financial performance may hinge on the diverse cultural and societal contexts of European countries. Based on agency and national culture theories, we hypothesize that the positive relationship between employee stock ownership and return on assets (ROA) is stronger in those nations with lower uncertainty avoidance and higher social trust. Using a multisource, time‐lagged, large‐scale dataset of 1,741 firms from 21 countries in Europe, our multilevel, random coefficient modeling analysis found evidence for these hypotheses, suggesting that uncertainty avoidance and social trust serve as important contextual cues in predicting the linkage between employee stock ownership and financial performance. Our supplemental analysis with distinction between the managerial and nonmanagerial employee stock ownership further indicates managerial employee stock ownership has a direct positive effect on ROA. Although nonmanagerial employee stock ownership had a nonsignificant association with ROA, the relationship was positive and significant when uncertainty avoidance was low and social trust was high. This research contributes to the existing literature by illuminating some of the contextual influences altering the effectiveness of employee stock ownership. Our findings also offer practical suggestions for effectively using employee stock ownership.
Recommended Citation
Kang, Saehee and Kim, Andrea, "Employee Stock Ownership and Financial Performance in European Countries: The Moderating Effects of Uncertainty Avoidance and Social Trust" (2018). Management Faculty Research and Publications. 335.
https://epublications.marquette.edu/mgmt_fac/335
Comments
Accepted version. Human Resource Management, Vol. 58, No. 6 (September 26, 2018): 641-655. DOI. © 2018 Wiley.