The effects of bonus systems on firm performance in Taiwan's high-tech sector

Abstract

This research investigates the effects of cash and stock bonus systems in Taiwan's high-tech sector on firm performance, as measured by sales and value-added. To test the robustness of the estimated results, two proxies for bonuses are adopted, namely the total value of bonuses per employee and bonus payments as a percentage of total payroll. This study adopts three production functions, including the Cobb–Douglas, Translog and CES functions, to estimate the performance effects of bonuses. Our results show that, to a great extent, the bonus systems have positive impacts on firm performance. Journal of Comparative Economics 35 (1) (2007) 235–249.