The Impact of Incentive Pay on Corporate Crime

The Impact of Incentive Pay on Corporate Crime

This paper presents a moral hazard model analyzing the agent's incentive to commit corporate crime. The principal can only observe profits which the agent can increase by committing crime or exerting effort. It is shown how different incentive contracts, i.e., thresholdlinear, capped bonus...

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Bibliographic Details
Published in:MAGKS - Joint Discussion Paper Series in Economics (Band 52-2017)
Main Author: Herold, Daniel
Format: Article
Language:English
Published: Philipps-Universität Marburg 2017
Subjects:
cartels
Wirtschaft
corporate crime
moral hazard
incentive pay
Economics
Online Access:PDF Full Text
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Summary:This paper presents a moral hazard model analyzing the agent's incentive to commit corporate crime. The principal can only observe profits which the agent can increase by committing crime or exerting effort. It is shown how different incentive contracts, i.e., thresholdlinear, capped bonus and linear contracts, can be adjusted in order to promote agent's law abiding behavior. Any adjustment implies a loss in internal efficiency which decreases in individual sanctions imposed on the agent.
Physical Description:34 Pages
ISSN:1867-3678
DOI:10.17192/es2024.0549

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