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The elusive employee stock option plan‐productivity link: evidence from India

Author

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  • Ramesh Kumar Dhiman

Abstract

Purpose - The purpose of this paper is to delineate the effect of employee stock option plan (ESOP) on the corporate productivity in view of ever increasing competition among the firms to retain and attract qualified and competent manpower in India. Design/methodology/approach - Based on productivity characteristics in pre‐ESOP adoption period (one year), the research paper studies the ESOP impact on corporate productivity in a three year post adoption period for a sample of 202 listed Indian companies. Nearly half of these companies (99 companies) were classified into control group (non‐ESOP companies) and the others (103 companies) were categorized as experimental group (ESOP companies). Asset turnover ratio (ATO), based on the exhaustive literature survey, was identified and considered exclusive productivity parameter in this research. The significance of productivity differentials among the control and experimental groups were tested using the Wilcoxon Signed Rank test. Findings - The empirical evidence supports the hypothesis that ESOP does not improve the productivity performance of Indian corporate sector in short‐run. Furthermore, the variation of the two respective variables is not significant at any level of risk against the alternate hypothesis for 103 ESOP companies. Research limitations/implications - The results reported in the study are based on the single productivity parameter (ATO) for three year post ESOP measurement period, which is also limiting factors for obvious reasons. Practical implications - The outcomes of the study have wider implications for the HR professionals (designing a prudent ESOP plan), HR executives (ESOP implementations and its pitfalls) and the corporate‐employee combine for enriching mutual benefits for harmonious industrial relations. Originality/value - The research paper under consideration is expected to be a valuable contribution to the existing literature and to different stakeholders identified above.

Suggested Citation

  • Ramesh Kumar Dhiman, 2009. "The elusive employee stock option plan‐productivity link: evidence from India," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 58(6), pages 542-563, July.
    • Handle: RePEc:eme:ijppmp:v:58:y:2009:i:6:p:542-563
    DOI: 10.1108/17410400910977082
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    Citations

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    Cited by:

    1. Maxwell Sandada & Kamunyaru Batanai Basil & Asphat Muposhi, 2016. "The Influence of Employee Share Ownership Schemes on Firm Performance: the Case of Zimbabwean Firms," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 12(2), pages 37-50, April.
    2. Choi Sang Long & Ajagbe Akintunde Musibau, 2013. "Can Employee Share Option Scheme Improve Firm’s Performance? A Malaysian case study," Information Management and Business Review, AMH International, vol. 5(3), pages 119-128.
    3. Maxwell Sandada & Kamunyaru Batanai Basil & Asphat Muposhi, 2016. "The Influence of Employee Share Ownership Schemes on Firm Performance: the Case of Zimbabwean Firms," EuroEconomica, Danubius University of Galati, issue 2(12), pages 37-50, April.
    4. MAHMOOD Athar, 2020. "Employee Stock Option Plans: A Meta-Analysis (Understanding Impact Of Esops Through Literature)," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 15(1), pages 100-114, April.

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