HEC Research Papers Series,
HEC Paris

Abstract: In 1997, France Télécom, the French telecommunications firm, went through a partial privatization or Opening of Shareholding. As part of this process, the government offered current and prior France Télécom employees the opportunity to buy portfolios of shares with various combinations of discounts, required holding periods, and levels of downside protection. We adapt a neoclassical model of investment decision-making that takes into account firm-specific human capital and holding period restrictions to predict how employees might respond to the share offers. Using a new database that tracks over 200,000 eligible participants, we analyze the employees' characteristics and their decisions regarding (a) whether to participate; (b) how much to invest; and (c) what form of stock alternatives they selected.

Keywords: Privatization; human capital; France Telecom; employee ownership; portfolio choice

JEL-codes: E69; G18; G32; L32

55 pages, April 24, 2000

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