Employee Stock Option Plans (ESOP) have become an important strategic tool in knowledge-intensive industries such as Information Technology (IT), where human capital plays a critical role in value creation. However, empirical evidence on the ESOP performance relationship remains inconclusive, particularly in emerging markets like India. This study examines the impact of ESOP adoption on firm performance in the Indian IT industry over the period 2009–2025. Using panel regression techniques, including pooled OLS, fixed effects, and lagged models, the study finds that ESOP adoption is positively associated with firm performance in baseline estimations. However, this relationship becomes statistically insignificant after controlling for firm-specific heterogeneity and endogeneity. The findings suggest that ESOP effectiveness is contingent upon firm-level characteristics and governance structures rather than being universally beneficial. The study contributes to the literature by providing sector-specific evidence from the Indian IT industry.

Keywords

ESOP, Firm Performance, Agency Theory, IT Industry, Emerging Markets.