Are CEOs incentivized to avoid Corporate Taxes? - Empirical Evidence on Managerial Bonus Contracts

__Abstract__ In this paper, we test empirically whether there is a relationship between corporate income taxes and CEO bonus payments. Using Compustat and ExecuComp data from 1992 to 2010, we find mixed results. Looking at the whole sample, the average bonus contract rewards tax savings excessively in comparison to other determinants of corporate net income. A possible ex- planation is that managers require to be compensated for the additional risk inherent in running an aggressive tax strategy. In accordance with previous lit- erature, we document a substantial heterogeneity in compensation practices across industries. It appears that our main result is driven by firms in the In- dustrial and Retail sectors. We further find that companies with greater tax planning opportunities, for example by virtue of size or operations abroad, are more likely to condition the CEO’s bonus on corporate income taxes

Paid to quit

__Abstract__ Inspired by a recent observation about an online retail company, this paper explains why a firm may find it optimal to offer an exit bonus to recent hires so as to induce self-selection. We study a double adverse selection problem, in which the principal can neither observe agents’ commitment to the job nor their intrinsic motivation. A steep wage-tenure profile deters uncommitted agents from applying. An exit bonus can stimulate that –among the committed agents– those who discovered that they are not intrinsically motivated for the job discontinue employment with the principal. Our key findings are that offering an exit bonus increases profits when the first adverse selection problem is sufficiently severe compared to the second and that the exit bonus needs to come as a surprise for the agents in order to function well

Paid to Quit, Cheat, and Confess

When people or organizations engage in voluntary exchange, it is crucial how much information either side of a deal disposes of. The common theme in the chapters of this book is asymmetric information, which can create an imbalance of power between the two parties involved in a transaction. The author describes a variety of instruments that the informationally disadvantaged organizations may use to overcome the resulting adverse selection and moral hazard problems. In doing so, he deviates from the neoclassical assumption of selfishness and introduces bounds to individual rationality in his models. The topics that are investigated range from tax evasion to innovative personnel policies

Paid to Quit

Inspired by a recent observation about an online retail company, this paper explains why a frm may fnd it optimal to ofer an exit bonus to recent hires so as to induce self-selection. We study a double adverse selection problem, in which the principal can neither observe agents’ commitment to the job nor their intrinsic motivation. A steep wage-tenure profle deters uncommitted agents from applying. An exit bonus can stimulate that—among the committed agents—those who discovered that they are not intrinsically motivated for the job discontinue employment with the principal. Our key fndings are that ofering an exit bonus increases profts when the frst adverse selection problem is sufciently severe compared to the second and that the exit bonus needs to come as a surprise for the agents in order to function well

Paid to Quit Paid to Quit

Abstract Inspired by a recent observation about an online retail company, this paper explains why a firm may find it optimal to offer an exit bonus to recent hires so as to induce self-selection. We study a double adverse selection problem, in which the principal can neither observe agents' commitment to the job nor their intrinsic motivation. A steep wage-tenure profile deters uncommitted agents from applying. An exit bonus can stimulate that -among the committed agents-those who discovered that they are not intrinsically motivated for the job discontinue employment with the principal. Our key findings are that offering an exit bonus increases profits when the first adverse selection problem is sufficiently severe compared to the second and that the exit bonus needs to come as a surprise for the agents in order to function well. JEL-codes: J310, J330, M520, M550

Paid to Quit

textabstractInspired by a recent observation about an online retail company, this paper explains why a frm may fnd it optimal to ofer an exit bonus to recent hires so as to induce self-selection. We study a double adverse selection problem, in which the principal can neither observe agents’ commitment to the job nor their intrinsic motivation. A steep wage-tenure profle deters uncommitted agents from applying. An exit bonus can stimulate that—among the committed agents—those who discovered that they are not intrinsically motivated for the job discontinue employment with the principal. Our key fndings are that ofering an exit bonus increases profts when the frst adverse selection problem is sufciently severe compared to the second and that the exit bonus needs to come as a surprise for the agents in order to function well