IDEAS home Printed from https://ideas.repec.org/a/bpj/bejtec/v19y2019i2p10n5.html
   My bibliography  Save this article

Managerial Delegation Contracts, “Green” R&D and Emissions Taxation

Author

Listed:
  • Poyago-Theotoky Joanna

    (Department of Economics and Finance, La Trobe University, Melbourne, 3086Australia)

  • Yong Soo Keong

    (Xi'an Jiaotong-Liverpool University, International Business School Suzhou, Business Building, South Campus, 8 Chongwen Road, Suzhou Dushu Lake Science and Education Innovation District, Suzhou Industrial ParkSuzhou, China)

Abstract

We introduce an explicit environmental incentive into a managerial compensation contract in the context of a Cournot duopoly with pollution externalities under an emissions tax regime. We show that, depending on the effectiveness of “green” R&D, compared to a standard sales compensation contract, the explicit environmental focused contract results in more abatement. As a consequence, the regulator sets a lower emissions tax, and social welfare is higher. Moreover, in general, firm owners earn higher profits when adopting the environmental delegation contract.

Suggested Citation

  • Poyago-Theotoky Joanna & Yong Soo Keong, 2019. "Managerial Delegation Contracts, “Green” R&D and Emissions Taxation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(2), pages 1-10, June.
    • Handle: RePEc:bpj:bejtec:v:19:y:2019:i:2:p:10:n:5
    DOI: 10.1515/bejte-2017-0128
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/bejte-2017-0128
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/bejte-2017-0128?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kosuke Hirose & Sang-ho Lee & Toshihiro Matsumura, 2017. "Environmental corporate social responsibility : A note on the first-mover advantage under price competition," Economics Bulletin, AccessEcon, vol. 37(1), pages 214-221.
    2. Mujumdar, Sudesh & Pal, Debashis, 2007. "Strategic managerial incentives in a two-period Cournot duopoly," Games and Economic Behavior, Elsevier, vol. 58(2), pages 338-353, February.
    3. Rupayan Pal, 2012. "Delegation And Emission Tax In A Differentiated Oligopoly," Manchester School, University of Manchester, vol. 80(6), pages 650-670, December.
    4. Ulph, Alistair, 1996. "Environmental Policy and International Trade when Governments and Producers Act Strategically," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 265-281, May.
    5. Bouwe R. Dijkstra & Maria J. Gil‐Moltó, 2018. "Is emission intensity or output U‐shaped in the strictness of environmental policy?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(2), pages 177-201, April.
    6. Bebchuk, Lucian A. & Fried, Jesse M., 2003. "Executive Compensation as an Agency Problem," Berkeley Olin Program in Law & Economics, Working Paper Series qt81q3136r, Berkeley Olin Program in Law & Economics.
    7. Lucian Arye Bebchuk & Jesse M. Fried, 2003. "Executive Compensation as an Agency Problem," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 71-92, Summer.
    8. Chaim Fershtman & Kenneth L. Judd, 2006. "Equilibrium Incentives in Oligopoly: Corrigendum," American Economic Review, American Economic Association, vol. 96(4), pages 1367-1367, September.
    9. Peter Goldsmith & Rishi Basak, 2001. "Incentive Contracts and Environmental Performance Indicators," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 20(4), pages 259-279, December.
    10. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
    11. Wendelin Schnedler, 2008. "When Is It Foolish to Reward for A While Benefiting from B?," Journal of Labor Economics, University of Chicago Press, vol. 26(4), pages 595-619, October.
    12. Emmanuel Petrakis & Anastasios Xepapadeas, "undated". "To Commit or Not to Commit: Environmental Policy In Imperfectly Competitive Markets," Working Papers 0110, University of Crete, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hirose, Kosuke & Matsumura, Toshihiro, 2023. "Green transformation in oligopoly markets under common ownership," Energy Economics, Elsevier, vol. 126(C).
    2. Hirose, Kosuke & Ishihara, Akifumi & Matsumura, Toshihiro, 2024. "Tax versus regulations: Polluters’ incentives for loosening industry emission targets," Energy Economics, Elsevier, vol. 136(C).
    3. Xing Mingqing & Lee Sang-Ho, 2024. "The Strategic Adoption of Environmental Corporate Social Responsibility with Network Externalities," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 24(1), pages 399-418, January.
    4. Hirose, Kosuke & Matsumura, Toshihiro, 2022. "Common ownership and environmental Corporate Social Responsibility," Energy Economics, Elsevier, vol. 114(C).
    5. Lee, Sang-Ho & Park, Chul-Hi, 2020. "Environmental Regulations in Private and Mixed Duopolies: Emission Taxes versus Green R&D Subsidies," MPRA Paper 98833, University Library of Munich, Germany.
    6. Hirose, Kosuke & Matsumura, Toshihiro, 2024. "Optimal Energy-Saving Investments and Jevons Paradox in Duopoly Markets," MPRA Paper 121836, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Miguel Antón & Florian Ederer & Mireia Giné & Martin Schmalz, 2023. "Common Ownership, Competition, and Top Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 131(5), pages 1294-1355.
    2. Domenico Buccella & Luciano Fanti & Luca Gori, 2023. "Managerial firms’ profitability, unions, and environmental taxes," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 94(2), pages 575-598, June.
    3. Feng, L. & Hendrikse, G.W.J., 2011. "Chain Interdependencies, Measurement Problems, and Efficient Governance Structure: Cooperatives versus Publicly Listed Firms," ERIM Report Series Research in Management ERS-2011-001-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    4. Yasunori Ouchida & Daisaku Goto, 2022. "Strategic non‐use of the government's precommitment ability for emissions taxation: Environmental R&D formation in a Cournot duopoly," Australian Economic Papers, Wiley Blackwell, vol. 61(1), pages 181-206, March.
    5. Buccella, Domenico & Fanti, Luciano & Gori, Luca, 2022. "‘Green’ managerial delegation theory," Environment and Development Economics, Cambridge University Press, vol. 27(3), pages 223-249, June.
    6. Garcia, Arturo & Leal, Mariel & Lee, Sang-Ho & Park, Chul-Hi, 2024. "Merger incentive and strategic corporate social responsibility by a multiproduct corporation," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 193-206.
    7. Sudhir Kumar Jaiswal & Asish Kumar Bhattacharyya, 2016. "The role of operating efficiency and asset productivity in relative performance evaluation and CEO compensation in Indian firms," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 43(3), pages 201-221, September.
    8. Li, Feng & Hendrikse, George W.J., 2009. "CEO Compensation in Cooperatives versus Publicly Listed Firms," 2009 Conference, August 16-22, 2009, Beijing, China 51619, International Association of Agricultural Economists.
    9. Calcagno, R. & Renneboog, L.D.R., 2004. "Capital Structure and Managerial Compensation : The Effects of Renumeration Seniority," Discussion Paper 2004-120, Tilburg University, Center for Economic Research.
    10. Andrei Shleifer, 2004. "Does Competition Destroy Ethical Behavior?," American Economic Review, American Economic Association, vol. 94(2), pages 414-418, May.
    11. Fabbri, Francesca & Marin, Dalia, 2012. "What explains the rise in CEO pay in Germany? A Panel Data Analysis for 1977-2009," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 374, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    12. Qiu, Buhui & Trapkov, Svetoslav & Yakoub, Fadi, 2014. "Do target CEOs trade premiums for personal benefits?," Journal of Banking & Finance, Elsevier, vol. 42(C), pages 23-41.
    13. Ferrell, Allen & Liang, Hao & Renneboog, Luc, 2016. "Socially responsible firms," Journal of Financial Economics, Elsevier, vol. 122(3), pages 585-606.
    14. Stefan Bach, 2014. ""Reichensteuer"-Diskussion: Hintergrund und Perspektiven," DIW Roundup: Politik im Fokus 16, DIW Berlin, German Institute for Economic Research.
    15. Kato, Takao & Kim, Woochan & Lee, Ju Ho, 2007. "Executive compensation, firm performance, and Chaebols in Korea: Evidence from new panel data," Pacific-Basin Finance Journal, Elsevier, vol. 15(1), pages 36-55, January.
    16. Renneboog, L.D.R. & Szilagyi, P.G., 2009. "Shareholder Activism through the Proxy Process," Other publications TiSEM cc25d736-2965-4511-b100-1, Tilburg University, School of Economics and Management.
    17. Oyer, Paul & Schaefer, Scott, 2011. "Personnel Economics: Hiring and Incentives," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 20, pages 1769-1823, Elsevier.
    18. Matthias Kiefer & Edward Jones & Andrew Adams, 2016. "Principals, Agents and Incomplete Contracts: Are Surrender of Control and Renegotiation the Solution?," CFI Discussion Papers 1603, Centre for Finance and Investment, Heriot Watt University.
    19. Compton, Ryan & Nicholls, Christopher C. & Sandler, Daniel & Tedds, Lindsay, 2011. "Quantifying the Personal Income Tax Benefits of Backdating: A Canada - US Comparison," MPRA Paper 39789, University Library of Munich, Germany.
    20. Werner Neus & Manfred Stadler & Maximiliane Unsorg, 2020. "Market structure, common ownership, and coordinated manager compensation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1262-1268, October.

    More about this item

    Keywords

    “green” R&D; abatement; emissions tax; managerial delegation; cournot duopoly;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:19:y:2019:i:2:p:10:n:5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.