Incentive effects of bonus taxes in a principal : agent model

Helmut M. Dietl, Martin Grossmann, Markus Lang and Simon Wey

Several countries have implemented bonus taxes for corporate executives in response to the financial crisis of 2007-2010. Using a principal-agent model, this paper investigates the incentive effects of bonus taxes by analyzing the agent's and principal's behavior. Specifically, we show how bonus taxes affect the agent's incentives to exert effort and the principal's decision regarding the composition of the compensation package (fixed salary and bonus rate). We find that, surprisingly, a bonus tax can increase the bonus rate and decrease the fixed salary. In addition, a bonus tax can induce the principal to pay higher bonuses even though the agent's effort always decreases

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Year of publication:	2012
Authors:	Dietl, Helmut ; Grossmann, Martin ; Lang, Markus ; Wey, Simon
Publisher:	Zürich : Univ., Inst. für Betriebswirtschaftslehre
Subject:	Sondersteuer \| Special tax \| Lohnsteuer \| Wage tax \| Managervergütung \| Executive compensation \| Leistungsentgelt \| Performance pay \| Wirkungsanalyse \| Impact assessment \| Prinzipal-Agent-Theorie \| Agency theory

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Extent:	Online-Ressource (28 S.) graph. Darst.
Series:	UZH Business Working Paper Series. - Zürich : Inst. für Betriebswirtschaftslehre, Univ. Zürich, ZDB-ID 2690592-9. - Vol. 313 University of Zurich Institute for Strategy and Business Economics Working Paper ; No. 140
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature
Language:	English
Notes:	Systemvoraussetzungen: Acrobat Reader
Other identifiers:	10.2139/ssrn.1723907 [DOI]
Classification:	H24 - Personal Income and Other Nonbusiness Taxes and Subsidies ; J30 - Wages, Compensation, and Labor Costs. General ; M52 - Compensation and Compensation Methods and Their Effects (stock options, fringe benefits, incentives, family support programs)
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10009736472