Managing multinational corporations through compensation: The risk-sharing contract method
AbstractThis 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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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economics and Business.
Volume (Year): 64 (2012)
Issue (Month): 3 ()
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Web page: http://www.elsevier.com/locate/jeconbus
MNC; Incentives; Principal-agent; Distance;
Find related papers by 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 - - Business Administration - - - Personnel Management; Executives; Executive Compensation
- M16 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - International Business Administration
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
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