Analysis Effect of Esop Adaption to Profitability and Value of the Public Company Compared to the Non - Esop Public Company

Analysis Effect of ESOP Adaption to Profitability and Value of the Public Company compared to the non - ESOP Public Company

CHAPTER I

Introduction

A. Research Background

Employee Stock Ownership Plan (ESOP's) can be define as ----. At this time in Indonesia companies that began to apply the concept of stock ownership by employees can be divided into two groups. First group is the public companies that were already listed in Indonesia Stock Exchange (Bursa Efek Indonesia) or usually called .Tbk Firm. This companies allocate the stock ownership to their employee by ESA (Employee stock Allocation) program, share bonus plan program and stock option plan. Second group is the multinational companies that have a subsidiaries in Indonesia. They share the stock ownership globally as a compensation to their employee but this company still private company not a public company like a first group (Saptarina Agus, 2002). This research focused to the first group of companies that adopt ESOP's in Indonesia.

Employee ownership appears to increase production and profitability, and improve employees' dedication and sense of ownership (Rosen, C., Case, J., Staubus, M., 2005). Recent research about ESOP by Stoyu I. Ivanov (2011) find opposite conclusion about the implementation of ESOP. The conclusion from Stoyu I. Ivanov (2011) is "employee stock ownership plans (ESOPs) have gained a bad reputation because of a few large-scale bankruptcies and destruction of value in companies that have adopted ESOPs". This research analysis the ESOP's adaptation public company profitability and value comparing to the non - ESOP's public company profitability and value.