Financial participation, productivity and conflict in French firms

Many studies show that financial participation – such as profit sharing and employee share ownership – have positive effects on productivity and social performance (reducing absence and labour turnover). A recent study shows that profit sharing and employee share ownership also reduce conflicts. The question then arises whether the profit sharing and employee share ownership continue to affect productivity directly, or whether their effects result entirely from reduced conflict? To answer this question, we use a sample of 2747 French firms in 2015 and 2016, to estimate a Cobb–Douglas production function. Profit sharing had a highly statistically significant, positive effect on productivity, but employee share ownership (alone) was not significant. These results are not sensitive to the inclusion of conflicts. To allow for selection of firms into profit sharing and/or employee share ownership, we use treatment effects models where our treatment uses combinations of the two. Our results show first that profit sharing alone, employee share ownership alone, and the two combined significantly raise productivity. These effects are even larger with treatment models, and they are also not sensitive to the inclusion of the conflict variables. The paper thus documents further evidence for the positive impact of financial participation on firm productivity independently of conflicts.