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

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  • Shoham, Amir

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.

Suggested Citation

  • Shoham, Amir, 2012. "Managing multinational corporations through compensation: The risk-sharing contract method," Journal of Economics and Business, Elsevier, vol. 64(3), pages 231-239.
    • Handle: RePEc:eee:jebusi:v:64:y:2012:i:3:p:231-239
    DOI: 10.1016/j.jeconbus.2012.01.002
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    References listed on IDEAS

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    More about this item

    Keywords

    MNC; Incentives; Principal-agent; Distance;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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