Scandinavian Working Papers in Business Administration

Working Papers,
Hanken School of Economics

No 492: Determinants of Profit Sharing in the Finnish Sector

Laura Arrantz-Aperte () and Almas Heshmati ()
Additional contact information
Laura Arrantz-Aperte: Swedish School of Economics and Business Administration, Postal: Arkadiankatu 22, P.O.B. 479; FIN 00101 Helsinki, Finland
Almas Heshmati: The United Nations University, World Institute for Development Economics Research, Postal: Katajanokanlaituri 6B, FIN-00160 Helsinki, Finland.

Abstract: This study investigates the role of factors that determine individual employee’s and firms participation in profit sharing schemes. Using a large panel data of Finnish employees for the period 1996-2000 we analyse individual and workplace characteristics that make firms employ profit sharing schemes and workers susceptible of receiving profit sharing bonuses. In particular two links between profit sharing schemes and workers performance have been analysed. First, in looking at profit sharing as an incentive device the results show a positive link between firm size and monitoring costs. Second, we find that younger individuals with higher mean salary and capacity to bear risk are more susceptible to profit sharing schemes. The industrial sector in which the individual is employed is also an important determinant factor. We find weak evidence of a relationship between performance of firms and employment of profit sharing schemes at the industrial sector level.

Keywords: individual; firm; profit sharing; panel data

32 pages, November 27, 2003

Price: 10€

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