Employee Stock Ownership Plans and Productivity in Japanese Manufacturing Firms

By using a large new enterprise-level data set, and evidence drawn from case studies, we show that Japanese employee stock ownership plans (ESOPs) are a pervasive and neglected institution. In 1988, more than 90% of all firms listed on Japanese stock markets had an ESOP, and close to 50% of the labour force in firms with ESOPs participated in the plan. Micro data and a production function framework are used to examine the effects on business performance of ESOPs. On average, the net effect of introducing an ESOP is to increase productivity by almost 7%.