Abstract. This paper based on the perspective of firm's agency conflicts to examine the relationship between financial reporting quality and investment efficiency and to analyze the interaction effect between financial reporting and free cash flow on investment efficiency. We use 3,726 samples of Chinese listed firms during the period 2008-2012 to test the empirical models and find that financial reporting quality is negatively associated with both underinvestment and overinvestment. Further, we find that financial reporting quality is more strongly associated with overinvestment for firms with large free cash flow, which suggests that financial reporting quality can reduce information asymmetry arising from agency conflicts between the managers and investors. This paper extends the field of application of financial reporting quality and investment efficiency in the emerging capital markets in the world. Moreover, this is the first study that analyzes the interaction effect between financial reporting quality and free cash flow on investment efficiency.

Assessing the applicability of employee stock ownership plans for a family firm requires a basic understanding of their characteristics, followed by a careful analysis of the costs and benefits in the specific case. This note provides general information and offers guides for the critical, specific questions an adviser or owner should ask.

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The literature on Employee Stock Ownership Plans (ESOPs) has developed significantly over the past decades. Yet, despite ESOPs being well conceptualized, the deals struck in the real world are often more complex endeavours than suggested. While there are examples of ESOP deals as a one-stage process, it is often the case that ownership is transferred in multiple steps financed through subordinated debt. In addressing this added complexity, we will introduce concepts of ESOPs before providing a detailed description of what an add-on transaction entails. In doing so, we are particularly interested in describing key steps with focus on the impact on business and employee-owners. The paper will provide readers with additional insights into the widely used practice of multi-tranche ESOPs. Understanding the agents involved in the process, as well as the impact and potential pitfalls of add-on transactions are crucial factors in developing ESOPs as an alternative to external buy-outs.