The Productivity Effects of Profi t Sharing, EmployeeOwnership, Stock Option and Team Incentive Plans:Evidence from Korean Panel Data

We report the first results for Korean firms on the incidence, diffusion, scope and effects ofdiverse employee financial participation schemes, such as Profit Sharing Plans (PSPs),Employee Stock Ownership Plans (ESOPs), Stock Option Plans (SOPs) and Team IncentivePlans (TIPs). In do doing, we assemble important new panel data by merging data from asurvey of all Korean firms listed on Korean Stock Exchange which enjoys an unusually highresponse rate of 60 percent with accounting data from their corporate proxy statements. Ourestimated fixed effect models of production functions reveal consistently that the introductionof a PSP or a TIP will lead to a significant increase in productivity (about 10 percent) whereasno such evidence found for ESOPs or SOPs. We also find that the productivity payoffappears to be more long-lasting for PSPs than for TIPs. Finally, our fixed-effect estimatessuggest that PSPs and TIPs tend to be substitutes rather than complements in theirproductivity effects....