Understanding the economics of leveraged ESOPs

Over the last year, leveraged ESOPs have seen explosive growth. But the economic value of leveraged ESOPs comes not from tax benefits, but from corporate leveraging. In fact, compared with a debt-financed stock buy-back program, leveraged ESOPs are often economically inferior. Security analysts and corporate treasurers should be cautious when analyzing this widely heralded transaction. (Reprinted by permission of the publisher.)