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

Abstract

PurposeThe 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/approachBased 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.FindingsThe 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/implicationsThe 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 implicationsThe 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/valueThe research paper under consideration is expected to be a valuable contribution to the existing literature and to different stakeholders identified above.