Japanese companies are increasingly adopting stock option based compensation for executives and employees as a part of their efforts to regain profitability and capital market orientation after the burst of bubble economy. To analyze the economic justifications of option grants in Japanese...

The long-term employment contracts that helped to explain the once superior performance Japanese companies have come under pressure after the burst of the economic bubble in Japan after 1990. A large number of long-tenured, highly paid employees can become a financial burden for a company....