FEEM working papers "Note di lavoro" series
2002 .111

Selling Company Shares to Reluctant Employees: France Telecom's Experience

Authors: Dirk Jenter, François Degeorge, Alberto Moel, Peter Tufano
Series: Economy and Society
Editor: Fausto Panunzi
Type: Journal
Keywords: Employee stock ownership,privatization,portfolio choice
JEL n.: G30,G11,L33
JEL: Journal of Financial Economics
Date: 2002


In 1997, France Telecom, the state-owned French telephone company, went through a partial privatization. We adapt a standard neoclassical model to predict how employees might respond to the firm's offer to sell them various classes of shares. Using a database that tracks over 200,000 eligible participants, we analyze employees' decisions whether to participate; how much to invest; and what form of stock alternatives they selected.
The results are broadly consistent with the neoclassical model. However, we report four anomalous findings: (1) The firm specificity of human capital has a negligible effect on employees' investment decisions; (2) the amount of funds invested in the stock plans seems driven by a different set of forces than the decision to participate, which we suspect reflects a "threshold effect" that we attempt to measure; (3) employees "left on the table" benefits equal to one to two month's salary by failing to participate; and (4) most participants underweighted the most valuable asset.

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