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Agency‐Theory and Internal‐Labor‐Market Explanations of Bonus Payments: Empirical Evidence from Spanish Firms

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  • Pedro Ortín‐Ángel
  • Vicente Salas‐fumás

Abstract

This paper combines agency theory and internal‐labor‐market theories to explain the determinants of bonus payments among a large sample of top and middle managers from Spanish firms. A distinction is made between the decision whether to pay bonus or not and the size of the bonus. The empirical evidence confirms that the two decisions are determined by different factors. The results of the analysis show a trade‐off between short‐term and long‐term incentives (bonuses and promotion opportunities) as well as differences in the pattern of compensation policies across economic sectors and functional areas inside the firm.

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  • Pedro Ortín‐Ángel & Vicente Salas‐fumás, 1998. "Agency‐Theory and Internal‐Labor‐Market Explanations of Bonus Payments: Empirical Evidence from Spanish Firms," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(4), pages 573-613, December.
    • Handle: RePEc:bla:jemstr:v:7:y:1998:i:4:p:573-613
    DOI: 10.1111/j.1430-9134.1998.00573.x
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    Cited by:

    1. Alberto Bayo-Moriones & Jose Enrique Galdon-Sanchez & Sara Martinez-De-Morentin, 2013. "The Diffusion of Pay for Performance across Occupations," ILR Review, Cornell University, ILR School, vol. 66(5), pages 1115-1148, October.
    2. Alberto Bayo-Moriones & Jose E. Galdon-Sanchez & Sara Martinez-de-Morentin, 2017. "Performance Measurement and Incentive Intensity," Journal of Labor Research, Springer, vol. 38(4), pages 496-546, December.
    3. Arnaldo Camuffo, 2002. "The Changing Nature of Internal Labor Markets," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 6(4), pages 281-294, December.
    4. Grund, Christian & Walter, Tanja, 2013. "Management Compensation and the Economic Crisis: Longitudinal Evidence from the German Chemical Sector," IZA Discussion Papers 7435, Institute of Labor Economics (IZA).
    5. Christian Grund & Matthias Kräkel, 2012. "Bonus Payments, Hierarchy Levels, and Tenure: Theoretical Considerations and Empirical Evidence," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 64(2), pages 101-124, April.
    6. Erling Barth & Bernt Bratsberg & Torbjørn Hægeland & Oddbjørn Raaum, 2008. "Who pays for performance?," International Journal of Manpower, Emerald Group Publishing Limited, vol. 29(1), pages 8-29, March.
    7. Ricart, Joan E. & Corrales, Jose M., 2000. "Managerial appraisal and compensation: The case of Spain," IESE Research Papers D/413, IESE Business School.

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