Securitization and Compensation in Financial Institutions

Inderst, Roman; Pfeil, Sebastian

doi:10.2139/ssrn.1690742

Cited by 11 publications

(4 citation statements)

References 69 publications

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“…The compensation that the agent receives after the loan repayment is not subject to the bonus tax, but discounted by the agent due to his or her impatience. Inderst and Pfeil (2013) show that in this scenario the effect of the bonus tax on the average loan quality is ambiguous. The loan quality increases if the agent's discount rate exceeds a certain cut-off value and decreases if the discount rate falls below this cut-off value.…”

Section: Bonus Taxes Investment Decisions and Capital Structurementioning

confidence: 90%

“…When analyzing the relationship between management compensation, loan quality and securitization decisions in financial institutions, Inderst and Pfeil (2013) also discuss how a bonus tax on short-term compensation would alter the optimal decisions of a risk-neutral and impatient agent. In their model, the agent can receive compensation at two points in time.…”

Section: Bonus Taxes Investment Decisions and Capital Structurementioning

confidence: 99%

See 1 more Smart Citation

Taxation and agency conflicts between firm owners and managers: a review

Bauer

Kourouxous

Krenn

2017

Bus Res

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When analyzing the influence of taxation on agency conflicts between firm owners and managers, one can draw on theoretical principal-agent literature from various research fields. In recent years, this interdisciplinary research has grown significantly covering research with regards to optimal compensation, investment decisions, tax avoidance and transfer pricing while analyzing the effects of corporate income taxes, wage taxes, bonus taxes and shareholder taxes. Our paper provides a comprehensive review of analytical literature that studies the influence of taxation on agency conflicts between firm owners and managers. Above and beyond summarizing research findings, we discuss how taxes are commonly implemented in We thank Claire Estebanez, Joachim Gassen, Thomas Gehrig, Rainer Niemann, Thomas Pfeiffer, and two anonymous referees for their valuable comments and suggestions. We are grateful to participants at the VHB conference 2016, the DART Accounting Workshop at the University of Graz and a research seminar at the University of Vienna.

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Section: Bonus Taxes Investment Decisions and Capital Structurementioning

confidence: 90%

Section: Bonus Taxes Investment Decisions and Capital Structurementioning

confidence: 99%

Taxation and agency conflicts between firm owners and managers: a review

Bauer

Kourouxous

Krenn

2017

Bus Res

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“…In Inderst and Pfeil (2010), banks need to incentivize agents for screening the quality of loans which becomes private information (internal agency problem). Banks may provide too little incentives for screening due to an externality problem vis-à-vis the buyers of securities who benefit from higher loan quality (external agency problem).…”

Section: Introductionmentioning

confidence: 99%

Bank capital requirements and mandatory deferral of compensation

Feess

Wohlschlegel²

2018

J Regul Econ

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Tighter capital requirements and mandatory deferral of compensation are among the most prominently advocated regulatory measures to reduce excessive risk-taking in the banking industry. We analyze the interplay of the two instruments in an economy with two heterogenous banks that can fund uncorrelated projects with fully diversifiable risk or correlated projects with systemic risk. If both project types are in abundant supply, we find that full mandatory deferral of compensation is beneficial as it allows for weaker capital requirements, and hence for a larger banking sector, without increasing the incentives for risk-shifting. With competition for uncorrelated projects, however, deferred compensation may misallocate correlated projects to the bank which is inferior in managing risks. Our findings challenge the current tendency to impose stricter regulations on more sophisticated institutes.

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“…8 More specifically, while our model interacts two costly tasks, Inderst and Pfeil (2013) combine an ex-ante moral-hazard problem with a problem of interim private information, in the spirit of the larger literature on "delegated expertise" (c.f. e.g., Levitt and Snyder (1997) or, more recently, Gromb and Martimort (2007), as well as the application in Heider and Inderst (2012)).…”

mentioning

confidence: 99%

Regulating Deferred Incentive Pay

2013

Self Cite

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Our paper evaluates recent regulatory proposals mandating the deferral of bonus payments and claw-back clauses in the financial sector. We study a broadly applicable principal agent setting, in which the agent exerts effort for an immediately observable task (acquisition) and a task for which information is only gradually available over time (diligence). Optimal compensation contracts trade off the cost and benefit of delay resulting from agent impatience and the informational gain. Mandatory deferral may increase or decrease equilibrium diligence depending on the importance of the acquisition task. In particular, higher acquisition incentives make it more likely that deferral regulation increases equilibrium diligence. Our results imply concrete conditions on economic primitives that make mandatory deferral socially (un)desirable.

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Securitization and Compensation in Financial Institutions

Cited by 11 publications

References 69 publications

Taxation and agency conflicts between firm owners and managers: a review

Taxation and agency conflicts between firm owners and managers: a review

Bank capital requirements and mandatory deferral of compensation

Regulating Deferred Incentive Pay

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