PROFIT-SHARING, TECHNICAL EFFICIENCY CHANGE AND FINANCE CONSTRAINTS

Abstract

This paper analyses the mechanisms through which profit-sharing schemes may induce debt constrained firms to improve technical efficiency over time to guarantee positive profits. This hypothesis is first formalised in a partial equilibrium framework and then is tested on a sample of Italian traditional and cooperative firms. Technical efficiency change indexes are computed by DEA. These are regressed on a measure of finance constraints to analyse their impact on firms’ efficiency growth. The results support the hypothesis that a restriction in the availability of financial resources can affect positively the growth in efficiency in firms with profit-sharing schemes.

Citation

Wanda Maietta, O. and Sena, V. (2004), "PROFIT-SHARING, TECHNICAL EFFICIENCY CHANGE AND FINANCE CONSTRAINTS", Perotin, V. and Robinson, A. (Ed.) Employee Participation, Firm Performance and Survival (Advances in the Economic Analysis of Participatory & Labor-Managed Firms, Vol. 8), Emerald Group Publishing Limited, Leeds, pp. 149-167. https://doi.org/10.1016/S0885-3339(04)08007-X