The Scope,Nature,and Effects of Employee Stock Ownership Plans in Japan

Abstract

Using data for various years, including new data for 1973–84, the authors examine the scope, nature, determinants, and effects of Japanese employee stock ownership plans (ESOPs). In 1988, of firms listed on Japan's eight stock exchange markets, 91% had an ESOP, and the average (non-executive) employee plan participant owned stock worth about $14,000. Probit estimates for a sample of manufacturing firms show that firms were more likely to adopt ESOPs when recent business performance was below average, the capital/labor ratio was relatively low, and employment growth was relatively fast. Evidence is also found that ESOPs enhanced enterprise productivity. The authors argue that ESOPs have played an important, and largely overlooked, role in the success of the Japanese economy over the past two decades.