재무연구 제 권 호 (2022년 11월)
Asian Review of Financial Research, Vol., No..
pp.469~509
pp.469~509
Asset Pricing Implications of Firms’ Profit Sharing
Jaewan Bae College of Business, Korea Advanced Institute of Science and Technology (KAIST)
Jangkoo Kang College of Business, Korea Advanced Institute of Science and Technology (KAIST)
This study examines the asset pricing implications of a profit-sharing scheme by measuring a profit-sharing coefficient (PSC), which captures the firm’s tendency to share profits with its employees. We first find that firms with a high PSC earn higher future stock returns than firms with a low PSC. This arises because investors underestimate the positive effects of PSC on worker productivity while overreacting to the increased wage costs due to the high PSC. We further reveal the role of PSC in lowering firm risk by showing that earnings and stock returns of high-PSC firms are less sensitive to aggregate risk than those of low-PSC firms.
Jaewan Bae
Jangkoo Kang
This study examines the asset pricing implications of a profit-sharing scheme by measuring a profit-sharing coefficient (PSC), which captures the firm’s tendency to share profits with its employees. We first find that firms with a high PSC earn higher future stock returns than firms with a low PSC. This arises because investors underestimate the positive effects of PSC on worker productivity while overreacting to the increased wage costs due to the high PSC. We further reveal the role of PSC in lowering firm risk by showing that earnings and stock returns of high-PSC firms are less sensitive to aggregate risk than those of low-PSC firms.
