The Impact of Incentive Pay on Corporate Crime

Daniel Herold ()
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Daniel Herold: Justus-Liebig-University Giessen

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: 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.

Keywords: moral hazard; incentive pay; corporate crime; cartels (search for similar items in EconPapers)
JEL-codes: D82 D86 K20 K21 L14 L22 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2017
New Economics Papers: this item is included in nep-cta, nep-hrm, nep-law and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201752

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