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Financial Participation Plans and Firm Financial Performance: Evidence from a Dutch Longitudinal Panel

In: Advances in the Economic Analysis of Participatory and Labor-Managed Firms

Author

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  • Erik Poutsma
  • Geert Braam

Abstract

This study investigates the relationship between financial participation plans, that is profit sharing, share plans and option plans, and firm financial performance using a longitudinal panel data set of non-financial listed companies for the period 1992–2009 comprising 2,216 observations. In addition, it makes a distinction between financial participation plans that are narrow based, directed to top management and executives only, and broad based, targeted to all employees. The panel data also allow us to take into account time lag effects, as profit sharing is usually said to have short-term effects while stock options and share plans are more targeted to longer term impact. Our results show that broad-based profit-sharing plans and combinations of broad-based profit sharing and share plans are positively related with many firm financial performance indicators relative to companies without these plans. However, the results consistently show negative associations between both narrow- and broad-based option plans and firm financial performance.

Suggested Citation

  • Erik Poutsma & Geert Braam, 2012. "Financial Participation Plans and Firm Financial Performance: Evidence from a Dutch Longitudinal Panel," Advances in the Economic Analysis of Participatory & Labor-Managed Firms, in: Advances in the Economic Analysis of Participatory and Labor-Managed Firms, pages 139-183, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:aeapzz:s0885-3339(2012)0000013010
    DOI: 10.1108/S0885-3339(2012)0000013010
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