Taxation and Regulation of Bonus Pay
We explore the consequence for taxation and regulation of bonus pay when investors are protected by taxpayers from downside risk. The paper develops a model where workers in financial sector firms make decisions about effort and risk-taking which are influenced by the structure of bonus pay. Bailouts lead to too little effort, too much risk taking and increase inequality. We show that the optimal structure of bonuses can be implemented by a combination of a regulation on the structure of bonuses and a tax on their level.
|Date of creation:||Aug 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Palomino, F.A. & Prat, A., 1998.
"Risk Taking and Optimal Contracts for Money Managers,"
1998-108, Tilburg University, Center for Economic Research.
- Palomino, Frederic & Prat, Andrea, 2003. " Risk Taking and Optimal Contracts for Money Managers," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 113-37, Spring.
- Palomino, Frédéric & Prat, Andrea, 1999. "Risk Taking and Optimal Contracts for Money Managers," CEPR Discussion Papers 2066, C.E.P.R. Discussion Papers.
- Hendrik Hakenes & Isabel Schnabel, 2013.
"Bank Bonuses and Bail-Outs,"
Working Paper Series of the Max Planck Institute for Research on Collective Goods
2013_03, Max Planck Institute for Research on Collective Goods.
- Brian Bell, 2010. "Bankers' bonuses," LSE Research Online Documents on Economics 57934, London School of Economics and Political Science, LSE Library.
- John Thanassoulis, 2011. "Bankers' Pay Structure And Risk," Economics Series Working Papers 545, University of Oxford, Department of Economics.
- John Thanassoulis, 2011. "The Case For Intervening In Bankers' Pay," Economics Series Working Papers 532, University of Oxford, Department of Economics.
- Hirshleifer, David & Thakor, Anjan V, 1992. "Managerial Conservatism, Project Choice, and Debt," Review of Financial Studies, Society for Financial Studies, vol. 5(3), pages 437-70.
- John, Kose & Saunders, Anthony & Senbet, Lemma W, 2000.
"A Theory of Bank Regulation and Management Compensation,"
Review of Financial Studies,
Society for Financial Studies, vol. 13(1), pages 95-125.
- Kose John & Anthony Saunders & Lemma W. Senbet, 1998. "A Theory of Bank Regulation and Management Compensation," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-043, New York University, Leonard N. Stern School of Business-.
- Kose John & Anthony Saunders & Lemma W. Senbet, 1996. "A Theory of Bank Regulation and Management Compensation," New York University, Leonard N. Stern School Finance Department Working Paper Seires 96-30, New York University, Leonard N. Stern School of Business-.
- Doina Radulescu, 2012.
"The Effects of a Bonus Tax on Manager Compensation and Welfare,"
FinanzArchiv: Public Finance Analysis,
Mohr Siebeck, Tübingen, vol. 68(1), pages 1-16, March.
- Doina Maria Radulescu, 2010. "The Effects of a Bonus Tax on Manager Compensation and Welfare," CESifo Working Paper Series 3030, CESifo Group Munich.
- Coate, Stephen, 1995. "Altruism, the Samaritan's Dilemma, and Government Transfer Policy," American Economic Review, American Economic Association, vol. 85(1), pages 46-57, March.
- Ghatak, Maitreesh & Pandey, Priyanka, 2000. "Contract choice in agriculture with joint moral hazard in effort and risk," Journal of Development Economics, Elsevier, vol. 63(2), pages 303-326, December.
- Bruno Biais & Catherine Casamatta, 1999. "Optimal Leverage and Aggregate Investment," Journal of Finance, American Finance Association, vol. 54(4), pages 1291-1323, 08.
- Patrick Bolton & Hamid Mehran & Joel Shapiro, 2010. "Executive compensation and risk taking," Staff Reports 456, Federal Reserve Bank of New York.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:8532. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.