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

31 Pages Posted: 24 Aug 2010  

Takao Kato

Colgate University - Economics Department; IZA Institute of Labor Economics

Ju-Ho Lee

KDI School of Public Policy and Management

Jang-Soo Ryu

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.

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

JEL Classification: M52, J33, J24, J53, O53

Suggested Citation

Kato, Takao and Lee, Ju-Ho and Ryu, Jang-Soo, The Productivity Effects of Profit Sharing, Employee Ownership, Stock Option and Team Incentive Plans: Evidence from Korean Panel Data. IZA Discussion Paper No. 5111. Available at SSRN: https://ssrn.com/abstract=1663131

Takao Kato (Contact Author)

Colgate University - Economics Department ( email )

13 Oak Drive
Hamilton, NY 13346
United States
315-228-7562 (Phone)
315-228-7033 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Ju-Ho Lee

KDI School of Public Policy and Management ( email )

P.O. Box 184
Seoul, 130-868
Korea, Republic of (South Korea)
+82 2 3299 1016 (Phone)

Jang-Soo Ryu

Pukyong National University ( email )

599-1 Daeyeo-dong, Nam-Gu
Pusan 608-737
Korea

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