Panel B firm performance and asymmetric distribution
ATOBINQ, ATOBINQt+} AROA, database. Heteroscedasticity consistent t statistics are reported in parentheses.
b ASYMt is the asymmetric dis
仕
ibutionof stock/cash dis仕
ibutionas measured by the ratio of stock/cash proportion in employee bonus relative to stock/cash proportion in dividends;凹的
Mt
equals to one if the fmn is a family-controlled fmn, and zero otherwise; BDSZt is board size in seat number; BDSHt is the shareholding by board of directors; BLKSHt is outside blockholder shareholding; INDSTt is the percentage ofindep 巴 ndent
board member;Chiao Da Management Review Vol. 33 No.2, 2013 25
INSTt indicates the percentage of stocks by domestic financial institutions; FINSTt is the percentage of stocks by foreign fmancial institutions; DUALt equals to one when the CEO serves as chair of the board and zero otherwise; MGR _ SHARE is the shareholdings by managers. LEVt is total liabilities to total assets; SIZEt is the natural logarithm of total assets at year t; Growtht is the market to book ratio of shareholders' equity; RDt is R&D intensity at year t, defined as R&D expenditures divided by net sales.
C t statistics in parentheses • p < 0.05, •• p < 0.01, ••• p < 0.001
commonly employed in prior research (e.g., Young and Wu, 2009; Coles et al., 2005; Anderson et al., 2004; Beasley, 1996; Chung et al., 2002). The inverse Mills ratio (lMR) generated from the frrst stage is then added to Model (3) and (4) as the second-stage regression. Table 6 shows the results. The results for the second stage regression remain unchanged, indicating that the results in the main tests are not driven by the self-selection bias of
asymme的'.
7. Conclusion
This paper documents the relationships between profit sharing bonus and firm performance for public1y traded corporations in the high-tech
indus甘y
of Taiwan. As employee stock bonus in Taiwan is part of the profit sharing scheme,the decision for the amount and the method of profit sharing bonus is usually made along with the decision for shareholder dividends. The main contribution of this paper is disentangling the incentive and entrenchment effects of the profit sharing stock bonus practice that rarely exists in US data. Firm valuation generally increases with the profit sharing bonus. This result is consistent with a large literature on the positive incentive effects associated with increased employee stock bonus (Conte and Svejnar, 1990; Kruse, 1992, 1993; Lin and Chen, 2009; Jeng et al., 2009). The results also fmd that the positive relationship between employee bonus and future performance can increase with
asymme仕lC
distribution. The results are supportive of the prior literature that stock compensation can help align the interests between shareholders and the firm and can mitigate the agency problems between shareholders and managers.
This study is subject to a few limitations. First, 1 use Taiwan firms as our sample. Future studies could extend the research to other countries to improve the
26 The Asymmetric distribution between Stock Bonus and Stock Dividends: Net lncentives or Entrenchments?
generalizability of the results. Second, the results are subject to the robustness of the measure for asymmetric distribution-the stockJcash proportion of employee bonus relative to the stockJcash proportion of dividends, and two performance measures - TOBINQ and ROA. In addition, the effect of asymmetric
dis仕ibution
might be reflected in other outcomes. Future research can employ other research designs to validate whether benefits stil1 outweigh the costs of asymmetric distribution.
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