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The Productivity Effects of Profit Sharing, Employee Ownership, Stock Option and Team Incentive Plans: Evidence from Korean Panel Data

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Author Info

  • Kato, Takao

    ()
    (Colgate University)

  • Lee, Ju Ho

    ()
    (KDI School of Public Policy and Management)

  • Ryu, Jang-Soo

    ()
    (Pukyong National University)

Abstract

We report the first results for Korean firms on the incidence, diffusion, scope and effects of diverse employee financial participation schemes, such as Profit Sharing Plans (PSPs), Employee Stock Ownership Plans (ESOPs), Stock Option Plans (SOPs) and Team Incentive Plans (TIPs). In do doing, we assemble important new panel data by merging data from a survey of all Korean firms listed on Korean Stock Exchange which enjoys an unusually high response rate of 60 percent with accounting data from their corporate proxy statements. Our estimated fixed effect models of production functions reveal consistently that the introduction of a PSP or a TIP will lead to a significant increase in productivity (about 10 percent) whereas no such evidence found for ESOPs or SOPs. We also find that the productivity payoff appears to be more long-lasting for PSPs than for TIPs. Finally, our fixed-effect estimates suggest that PSPs and TIPs tend to be substitutes rather than complements in their productivity effects.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5111.

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Length: 31 pages
Date of creation: Aug 2010
Date of revision:
Publication status: published in: Tor Eriksson (ed.), Advances in the Economic Analysis of Participatory and Labor-Managed Firms Volume 11, Bingley: Emerald, 2010
Handle: RePEc:iza:izadps:dp5111

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Related research

Keywords: Korea; profit sharing; productivity; stock option; team incentive; employee stock ownership;

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References

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  1. Martin J. Conyon & Richard Freeman, 2002. "Shared Modes of Compensation and Firm Performance: UK Evidence," CEP Discussion Papers dp0560, Centre for Economic Performance, LSE.
  2. Takao Kato, 2000. "The Recent Transformation of Participatory Employment Practices in Japan," NBER Working Papers 7965, National Bureau of Economic Research, Inc.
  3. Zwick, Thomas, 2004. "Employee participation and productivity," Labour Economics, Elsevier, vol. 11(6), pages 715-740, December.
  4. Wadhwani, S. & Wall, M., 1988. "The Effects Of Profit-Sharing On Employment, Wages, Stock Returns And Productivity: Evidence From Uk Micro-Data," Papers 311, London School of Economics - Centre for Labour Economics.
  5. David Card & Richard Blundell & Richard B. Freeman, 2004. "Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000," NBER Books, National Bureau of Economic Research, Inc, number card04-1, October.
  6. Susan Helper, 1997. "Complementarity and Cost Reduction: Evidence from the Auto Supply Industry," NBER Working Papers 6033, National Bureau of Economic Research, Inc.
  7. Takao Kato & Ju HO Lee & Kang-sung Lee & Jang-soo Ryu, 2005. "Employee participation and involvement in korea: evidence from a new survey and field research," International Economic Journal, Taylor & Francis Journals, vol. 19(2), pages 251-281.
  8. Hsiao,Cheng, 2003. "Analysis of Panel Data," Cambridge Books, Cambridge University Press, number 9780521818551, November.
  9. Alex Bryson & Richard Freeman, 2008. "How does shared capitalism affect economic performance in the UK?," LSE Research Online Documents on Economics 51596, London School of Economics and Political Science, LSE Library.
  10. Nakamura, Masao & Nakamura, Alice, 1991. "Risk behavior and the determinants of bonus versus regular pay in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 5(2), pages 140-159, June.
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  12. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
  13. Derek C. Jones & Takao Kato & Jeffrey Pliskin, 1994. "Profit Sharing and Gainsharing: A Review of Theory, Incidence, and Effects," Economics Working Paper Archive wp_125, Levy Economics Institute, The.
  14. Jed DeVaro, 2005. "Teams, Autonomy, and the Financial Performance of Firms," Labor and Demography 0508004, EconWPA.
  15. Cin, Beom-cheol & Smith, Stephen C, 2002. "Employee Stock Ownership and Participation in South Korea: Incidence, Productivity Effects, and Prospects," Review of Development Economics, Wiley Blackwell, vol. 6(2), pages 263-83, June.
  16. Heywood, John S. & Jirjahn, Uwe & Wei, Xiangdong, 2008. "Teamwork, monitoring and absence," Journal of Economic Behavior & Organization, Elsevier, vol. 68(3-4), pages 676-690, December.
  17. Derek C. Jones & Panu Kalmi & Antti Kauhanen, 2006. "Human Resource Management Policies and Productivity: New Evidence from An Econometric Case Study," Oxford Review of Economic Policy, Oxford University Press, vol. 22(4), pages 526-538, Winter.
  18. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-17, August.
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