Do Stock Opiton Schemes Affect Technical Inefficiency? Evidence from Finland
AbstractIn this paper we study whether stock option schemes affect firm technical inefficiency. We estimate Cobb-Douglas stochastic production frontier models using a novel panel data set on the publicly listed Finnish firms in the manufacturing and ICT sectors over the period from 1992 to 2002. We find evidence that the mean inefficiency estimates in the ICT sector are clearly higher than in the manufacturing sector. Furthermore, our empirical findings suggest that broad-based option firms may have higher mean inefficiency than selective and non-option firms in the manufacturing sector. The quantitative assessments of the marginal effects on the inefficiency support the view that especially broad-based schemes affect the mean and the variance of the inefficiency term uit in the manufacturing sector, but not in the ICT sector. Our findings do not provide empirical support for the view that stock option schemes reduce firm technical inefficiency
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The Research Institute of the Finnish Economy in its series Discussion Papers with number 1085.
Length: 26 pages
Date of creation: 2007
Date of revision:
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Greene, W., 2001.
"Fixed and Random Effects in Nonlinear Models,"
New York University, Leonard N. Stern School Finance Department Working Paper Seires
01-01, New York University, Leonard N. Stern School of Business-.
- Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
- Jones, Derek C & Kato, Takao, 1995. "The Productivity Effects of Employee Stock-Ownership Plans and Bonuses: Evidence from Japanese Panel Data," American Economic Review, American Economic Association, vol. 85(3), pages 391-414, June.
- Caudill, Steven B & Ford, Jon M & Gropper, Daniel M, 1995. "Frontier Estimation and Firm-Specific Inefficiency Measures in the Presence of Heteroscedasticity," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 105-11, January.
- Martin Conyon & Richard B. Freeman, 2004.
"Shared Modes of Compensation and Firm Performance U.K. Evidence,"
in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 109-146
National Bureau of Economic Research, Inc.
- Martin J. Conyon & Richard Freeman, 2002. "Shared Modes of Compensation and Firm Performance: UK Evidence," CEP Discussion Papers dp0560, Centre for Economic Performance, LSE.
- Martin J. Conyon & Richard B. Freeman, 2001. "Shared Modes of Compensation and Firm Performance: UK Evidence," NBER Working Papers 8448, National Bureau of Economic Research, Inc.
- William C. Horrace & Peter Schmidt, 2002. "Confidence Statements for Efficiency Estimates from Stochastic Frontier Models," Econometrics 0206006, EconWPA.
- Wang, Hung-Jen, 2002.
"Heteroscedasticity and non-monotonic efficiency effects of a stochastic frontier model,"
31076, University Library of Munich, Germany.
- Hung-Jen Wang, 2002. "Heteroscedasticity and Non-Monotonic Efficiency Effects of a Stochastic Frontier Model," Journal of Productivity Analysis, Springer, vol. 18(3), pages 241-253, November.
- Ari Hyytinen & Iikka Kuosa & Tuomas Takalo, 2003.
"Law or Finance: Evidence from Finland,"
European Journal of Law and Economics,
Springer, vol. 16(1), pages 59-89, July.
- Wang, Hung-jen & Schmidt, Peter, 2001.
"One-step and two-step estimation of the effects of exogenous variables on technical efficiency levels,"
31075, University Library of Munich, Germany, revised Mar 2002.
- Hung-jen Wang & Peter Schmidt, 2002. "One-Step and Two-Step Estimation of the Effects of Exogenous Variables on Technical Efficiency Levels," Journal of Productivity Analysis, Springer, vol. 18(2), pages 129-144, September.
- Pitt, Mark M. & Lee, Lung-Fei, 1981. "The measurement and sources of technical inefficiency in the Indonesian weaving industry," Journal of Development Economics, Elsevier, vol. 9(1), pages 43-64, August.
- Caudill, Steven B. & Ford, Jon M., 1993. "Biases in frontier estimation due to heteroscedasticity," Economics Letters, Elsevier, vol. 41(1), pages 17-20.
- Schmidt, Peter & Sickles, Robin C, 1984. "Production Frontiers and Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 367-74, October.
- Anna Bottasso & Alessandro Sembenelli, 2004. "Does ownership affect firms’ efficiency? Panel data evidence on Italy," Empirical Economics, Springer, vol. 29(4), pages 769-786, December.
- Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
- Greene, William, 2005. "Reconsidering heterogeneity in panel data estimators of the stochastic frontier model," Journal of Econometrics, Elsevier, vol. 126(2), pages 269-303, June.
- Derek Jones & Panu Kalmi & Mikko Mäkinen, 2010.
"The productivity effects of stock option schemes: evidence from Finnish panel data,"
Journal of Productivity Analysis,
Springer, vol. 33(1), pages 67-80, February.
- Jones, Derek C. & Kalmi, Panu & Mäkinen, Mikko, 2006. "The Productivity Effects of Stock Option Schemes: Evidence from Finnish Panel Data," Discussion Papers 1026, The Research Institute of the Finnish Economy.
- Jones, Derek C. & Kalmi, Panu & Mäkinen, Mikko, 2004. "The Determinants of Stock Option Compensation: Evidence from Finland," Discussion Papers 957, The Research Institute of the Finnish Economy.
- Hadri, Kaddour, 1999. "Estimation of a Doubly Heteroscedastic Stochastic Frontier Cost Function," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(3), pages 359-63, July.
- Kumbhakar, Subal C & Ghosh, Soumendra & McGuckin, J Thomas, 1991. "A Generalized Production Frontier Approach for Estimating Determinants of Inefficiency in U.S. Dairy Farms," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(3), pages 279-86, July.
- Murphy, Kevin J., 1999. "Executive compensation," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 38, pages 2485-2563 Elsevier.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kaija Hyvönen-Rajecki).
If references are entirely missing, you can add them using this form.