Using data for various years, including new data for 1973 through 1984, the scope, nature, determinants, and effects of employee stock ownership plans (ESOP) in Japan are examined. In 1988, of firms listed on Japan's 8 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 and labor ratio was relatively low, and employment growth was relatively fast. Evidence is also found that ESOPs enhanced enterprise productivity. It is argued that ESOPs have played an important and largely overlooked role in the success of the Japanese economy over the past 2 decades.
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