The Productivity Effects of Employee Stock-Ownership Plans and Bonuses: Evidence from Japanese Panel Data

Derek Jones and Takao Kato

American Economic Review, 1995, vol. 85, issue 3, 391-414

Abstract: The authors report the first results for Japanese firms on the effects of employee stock-ownership plans (ESOPs) and bonuses by estimating production functions using new panel data. They find that the introduction of an ESOP will lead to a 4-5 percent increase in productivity; this productivity payoff takes three to four years. There is a modest productivity gain from the bonus system. The authors also find evidence that the productivity effect of bonuses is enhanced by the existence of ESOPs, suggesting that ESOPs may create a climate conducive to profit-sharing by enhancing long-term commitment and peer monitoring. Copyright 1995 by American Economic Association.

Date: 1995
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