首页 | 本学科首页   官方微博 | 高级检索  
     检索      


Tax incentives for inefficient executive pay and reward for luck
Authors:Robert F Göx
Institution:(1) University of Fribourg, Bd. de Pérolles 90, 1700 Fribourg, Switzerland
Abstract:I study the economic consequences of tax deductibility limits on salaries for the design of incentive contracts. The analysis is based on an agency model in which the firm’s cash flow is a function of the agent’s effort and an observable random factor beyond the agent’s control. According to my analysis, limiting the tax deductibility of fixed wages has two consequences. The principal rewards the agent on the basis of the observable random factor and adjusts the amount of performance-based pay in the optimal incentive contract. The new contract can have weaker or stronger work incentives than without the tax. The theoretical findings have implications for empirical compensation research. First, the analysis shows that reward for luck can be the optimal response to recent tax law changes, whereas earlier empirical literature has attributed this phenomenon to managerial entrenchment. Second, I demonstrate that a simple regression analysis that fails to control for separable measures of luck is likely to find an increased pay for performance sensitivity as a response to the introduction of tax deductibility limits on salaries even if the pay for performance sensitivity has actually declined.
Keywords:Executive compensation  Agency theory  Relative performance evaluation
本文献已被 SpringerLink 等数据库收录!
设为首页 | 免责声明 | 关于勤云 | 加入收藏

Copyright©北京勤云科技发展有限公司  京ICP备09084417号