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Managing multinational corporations through compensation: The risk-sharing contract method

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  • Shoham, Amir
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    Abstract

    This paper presents a mechanism that supports the flows of resources between subsidiaries of multinational companies. The mechanism is based on a risk-sharing contract between the HQ and the subsidiary manager. The model is built on the assumption that there are two alternative supervisory methods for promoting the flow of resources: incentives and direct monitoring. Analysis of the model leads to several interesting results, including some situations in which the manager of a subsidiary will be overcompensated. Another result indicates that as the distance between the home country and the host country increases, the incentive to the subsidiary manager increases.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0148619512000033
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economics and Business.

    Volume (Year): 64 (2012)
    Issue (Month): 3 ()
    Pages: 231-239

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    Handle: RePEc:eee:jebusi:v:64:y:2012:i:3:p:231-239

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    Web page: http://www.elsevier.com/locate/jeconbus

    Related research

    Keywords: MNC; Incentives; Principal-agent; Distance;

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    References

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