Standard principal-agent theory predicts that large firms should not use employee stock options and other stock-based compensation to provide incentives to non-executive employees. Yet, business practitioners appear to believe that stock-based compensation improves incentives, and mounting...

We analyze the consequences of bonus taxes, limited deductibility of bonuses from company pro ts and a corporate income tax (CIT) in a principal-agent model and explore how these tax instruments affect managerial incentives and how they change the design of incentive contracts used in...

Making use of panel data from a survey of highly educated professionals, gender pay gaps are explored with regard to total compensation as well as to individual compensation components. The results indicate meaningful male-female wage differentials for this quite homogeneous group of people...

Distorted performance measures in compensation contracts elicit suboptimal behavioral responses that may even prove to be dysfunctional (gaming). This paper applies the empirical test developed by Courty and Marschke (2008) to detect whether the widely used class of Residual Income based...

We analyze the optimal contract between a risk-averse manager and the initial shareholders in a two-period model where the manager's investment effort, carried out in period 1, and her current effort, carried out in period 2, both impact the second-period profit, so that it may be difficult to...

Using a simple symmetric principal-agent model of two banks, this paper studies the effects of both bailouts and bonus taxes on risk taking and managerial compensation. In contrast to existing literature, we assume financial institutions to be systemic only on a collective basis, implying...

This study investigates dynamics and convergence in CEO pay in Australias largest corporations over an 18 year period. Utilizing dynamic panel estimators, we find that CEO pay is driven by dynamic adjustments, firm size, board size, CEO tenure and firm performance. The largest pay-performance...