managers between countries whereas in the second scenario relocation possibilities exist. Our findings show that the effort …

compensation to managers in low-tax jurisdictions, if payroll enters the FA formula. Managers in high-tax jurisdictions face the …

We analyze the optimal contract between a risk-averse manager and the initial shareholders in a two-period model where …

. Agency theory’s insistence on linking the compensation of managers and directors as closely as possible to firm performance …

. This correlation exposes managers to risk and hence gives them an incentive to hedge against the poor performance of their …Incentive compensation induces correlation between the portfolio of managers and the cash flow of the firms they manage … the risk in his compensation. In particular, shareholders can monitor the managers̕ portfolio stochastically, and since …

an important reference point. This causes CEO pay to be affected by external risks, in contrast to optimal risk sharing. …

We argue that risk sharing motivates the bank-wide structure of bonus pay. In the presence of financial frictions that … make external financing costly, the optimal contract between shareholders and employees involves some degree of risk … to rationalize with incentive theories of bonus pay - but support an important risk sharing motive. In particular …