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Profit-Sharing and the Financial Performance of Companies: Evidence from U.K. Panel Data

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  • Bhargava, Sandeep
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    Abstract

    This paper examines the dynamic relationship between profit sharing and profitability in a sample of U.K. firms during the 1980s. The estimates indicate a positive short-run effect of the introduction of profit sharing schemes on the financial performance of companies. This relationship is evident even if unobserved firm-specific fixed effects and potential endogeneity of profit sharing are controlled for. Quite apart from its widely recognized influence on productivity and industrial relations, profit sharing is arguably a financially attractive option for firms. There is also evidence of the persistence of profitability in U.K. profit sharing firms. Copyright 1994 by Royal Economic Society.

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    Bibliographic Info

    Article provided by Royal Economic Society in its journal The Economic Journal.

    Volume (Year): 104 (1994)
    Issue (Month): 426 (September)
    Pages: 1044-56

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    Handle: RePEc:ecj:econjl:v:104:y:1994:i:426:p:1044-56

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    Cited by:
    1. Rayton, Bruce A., 2003. "The residual claim of rank and file employees," Journal of Corporate Finance, Elsevier, vol. 9(1), pages 129-148, January.
    2. Kato, Takao & Kauhanen, Antti & Salmi, Julia, 2013. "Empirical Evidence on the Dynamics of Incentive Plans," ETLA Working Papers 20, The Research Institute of the Finnish Economy.
    3. FitzRoy, Felix R. & Kraft, Kornelius, 1995. "On the choice of incentives in firms," Journal of Economic Behavior & Organization, Elsevier, vol. 26(1), pages 145-160, January.
    4. Balafoutas, Loukas & Kocher, Martin G. & Putterman, Louis & Sutter, Matthias, 2013. "Equality, Equity and Incentives: An Experiment," Munich Reprints in Economics 18172, University of Munich, Department of Economics.
    5. Leila Baghdadi & Rihab Bellakhal & Marc-Arthur Diaye, 2012. "Do French firms use financial participation to transfer more risk to their workers?," Documents de recherche 12-10, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    6. Bruce A. Rayton & Jonathan S. Seaton, 1996. "The Size of Employee Stakeholding in Large UK Corporations," Labor and Demography 9612001, EconWPA, revised 28 Jan 1999.
    7. Kraft, Kornelius & Ugarkovic, Marija, 2006. "Profit sharing and the financial performance of firms: Evidence from Germany," Economics Letters, Elsevier, vol. 92(3), pages 333-338, September.
    8. H. Naci Mocan & Deborah Viola, 1997. "The Determinants of Child Care Workers' Wages and Compensation: Sectoral Differences, Human Capital, Race, Insiders and Outsiders," NBER Working Papers 6328, National Bureau of Economic Research, Inc.
    9. Claudia Keser & Claude Montmarquette, 2011. "Voluntary versus Enforced Team Effort," Games, MDPI, Open Access Journal, vol. 2(3), pages 277-301, August.
    10. Yao, Shujie, 1997. "Profit Sharing, Bonus Payment, and Productivity: A Case Study of Chinese State-Owned Enterprises," Journal of Comparative Economics, Elsevier, vol. 24(3), pages 281-296, June.
    11. Bruce A. Rayton, 1996. "Rent-Sharing or Incentives? Estimating the Residual Claim of Average Employees," Labor and Demography 9603002, EconWPA, revised 09 Sep 1996.
    12. C Green & J S Heywood, 2008. "Profit Sharing and the Quality of Relations with the Boss," Working Papers 596078, Lancaster University Management School, Economics Department.
    13. Bruce A. Rayton, 1996. "Firm Performance and Compensation Structure: Performance Elasticities of Average Employee Compensation," Labor and Demography 9607001, EconWPA, revised 15 Apr 1998.
    14. Pablo González, 2002. "Profit Sharing Reconsidered: Efficiency Wages and Renegotiation Costs," Documentos de Trabajo 151, Centro de Economía Aplicada, Universidad de Chile.
    15. Alex Bryson & Richard B. Freeman, 2007. "Doing the right thing? does fair share capitalism improve workplace performance," LSE Research Online Documents on Economics 4964, London School of Economics and Political Science, LSE Library.

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