Quotation Niemann, Rainer, Sailer, Mariana. 2019. Loss-Offset Restrictions, Bonus Taxation and Performance-Based Incentive Contracts.




Management compensation constantly attracts media attention and is subject to legal interventions and best practice recommendations. Although the OECD recommends malus, penalty, or claw-back arrangements in compensation contracts, bonus contracts prevail in practice. Corporate and wage taxation can have substantial effects on the design of incentive systems that should be anticipated by tax legislators and corporate boards. We analytically examine the effects of wage taxation and loss-offset restrictions for corporate tax purposes on a firm owner’s contract choice. Our discrete principal-agent model shows that loss-offset restrictions do not systematically impede penalty arrangements. However, progressive wage taxation tends to discourage penalty contracts.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Working/discussion paper, preprint
Language English
Title Loss-Offset Restrictions, Bonus Taxation and Performance-Based Incentive Contracts
Year 2019


Sailer, Mariana (Details)
Niemann, Rainer (Universität Graz, Austria)
Management Accounting and Control Group AB (Details)
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