The role of Employee Share Ownership in the relationship between Corporate Sustainability Performance and Corporate Financial Performance
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2025-07-10
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en
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Employee share ownership (ESO) is mainly considered as an instrument to align employee behaviour to an organization’s strategic goals, such as economic outcomes. Going beyond this economic focus, this study examines whether and how ESO affects the trade-off between corporate sustainability performance (CSP) and corporate financial performance (CFP). Specifically, the study distinguishes between listed and unlisted firms, between corporate social performance (CSoP) and corporate environmental performance (CEP), and between short- and long-term effects of CFP. Using a unique European panel dataset, the results show that ESO leads to a negative CSP/CFP trade-off in the short-term, as increased CSP investment reduces short-term profitability. However, these investments tend to pay off over time, resulting in both higher CSP and CFP in the long-term. The results indicate that ESO has a stronger effect on the CSP/CFP trade-off in listed firms than in unlisted firms, particularly for CSoP. The stronger effect for CSoP likely results from the fact that social performance measures directly impact employees’ working conditions. Overall, the results suggest that ESO is more effective in contexts with stronger stakeholder accountability and public reporting requirements.
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Faculteit der Managementwetenschappen