Lower Bonus Research Articles

Faktor Pendorong Perusahaan Melakukan Transfer Pricing

Abstract
 This study aims to measure and analyze the effect of taxes, foreign ownership, company size and bonus mechanisms on transfer pricing in manufacturing sector companies listed on the Indonesia Stock Exchange in 2017-2020. The analytical method used is descriptive statistical analysis, classical assumption test, multiple linear regression analysis and hypothesis testing using the SPSS application. Determination of the sample in this study using purposive sampling technique so that the number of research samples obtained is 160 companies. The results of this study indicate that taxes have a positive effect on transfer pricing. This means that the higher the tax that must be paid, the more transfer pricing will increase. Foreign ownership has no effect on transfer pricing. This means that high or low foreign ownership will not increase transfer pricing. Firm size has a positive effect on transfer pricing. This means that the larger the size of the company, the more transfer pricing will increase. The bonus mechanism has no effect on transfer pricing. This means that the high or low bonus mechanism will not increase transfer pricing.

Apakah Perbedaan Gaya Kepemimpinan dan Skema Kompensasi Mempengaruhi Negosiasi Harga Transfer?

Transfer pricing can cause conflicts between divisions. Therefore, this study examines how the type of leadership and compensation schemes can influence the seller's transfer price decision to obtain an equal profit—using a 2x2 factorial design experimental method on leadership Style variables (supportive vs. unsupportive) and compensation scheme variables (high bonus percentage vs. low bonus percentage). This study shows that sellers will charge transfer prices close to the same profit under supportive leadership. In addition, the seller will charge a transfer price close to the same profit when the compensation scheme has a low bonus percentage. This study provides knowledge to companies to formulate effective strategies to reduce transfer price negotiation conflicts by considering the type of leadership and compensation schemes.

The management of talent: Optimal contracting for selection and incentives

AbstractOptimally reallocating human capital to tasks is key for an organization to successfully navigate a transition. We study how to design employment contracts to allocate employees to different valuable projects within an organization given two simultaneous challenges: The employees have private information about their cost of effort, and they exert unobservable effort. The optimal contract menu pairs a higher probability of assignment to a valuable project with a lower bonus in case of success. In limited cases, a fixed salary may be offered to employees with high effort cost. We link our results to job design features encountered in practice.

Managerial Overconfidence and Bank Bailouts

Empirical evidence suggests that managerial overconfidence and government guarantees contribute substantially to excessive risk-taking in the banking industry. This paper incorporates managerial overconfidence and limited bank liability into a principal-agent model, where the bank manager unobservably chooses the level of risk. An overconfident manager overestimates the returns to risk. Our main result is that managerial overconfidence necessitates an intervention into banker pay. This is due to the bank’s exploitation of the manager’s overvaluation of bonuses, which causes excessive risk-taking in equilibrium and is amplified by government guarantees. Moreover, we show that an optimal bonus tax rises in overconfidence, if returns to risk-taking are positive. Finally, the model indicates that overconfident managers are more likely to be found in banks with large government guarantees, low bonus taxes, and lax capital requirements.

T222. IMPAIRED COST-BENEFIT COMPUTATION IN SOCIAL CONTEXT IN PATIENTS WITH SCHIZOPHRENIA

BackgroundSocial withdrawal is one of core negative symptoms in schizophrenia, which dampens their social outcomes and prognosis. However, the underlying behavioral mechanisms of this symptom are poorly understood. In the present study, we aimed to explore the capacity of cost-benefit computation under social context in schizophrenia patients.MethodsWe recruited twenty-six patients, who met the criteria for diagnosis of schizophrenia, and thirty-one healthy controls matched for their age and gender ratio. All the participants were administrated to Effortful Job Interview Task, which is a novel behavioral paradigm where participants were asked to make an effort to get job offers. Before their taking effort, they were required to decide whether they would like to get involved in a less challenging job interview with no bonus point or a more challenging one with varied bonus points (i.e., 5, 15, 25 points, higher points indicate higher chance of getting a job offer).ResultsIn healthy controls, there was a main effect of prize on the choice percentage of challenging job interview (F (2, 90) = 68.577, p <0.001), with higher percentage of picking challenging interview under large (25) and medium (15) bonus points than low bonus point (5). Schizophrenia patients, however, exhibited lower percentage of challenging interview choices under medium (p =.015) and large (p <.01) bonus points than healthy controls, as reflected by a significant Group x Prize interaction effect (F (2, 110) = 6.478, p <0.01). In addition, we observe significant negative correlations between percentage of challenging interview choices under large bonus and amotivation sub-score on the Scale for the Assessment of Negative Symptoms (r = -0.49, p = 0.01). Interestingly, patients with schizophrenia displayed spared experience of pleasantness when they received a job offer as compared with healthy controls (p = .09). But, they showed blunted aversive experience towards the outcomes of failure as compared to healthy controls (p < .01).DiscussionThese findings suggest that impaired social cost-benefit computation may play a central role in the symptoms of social withdrawal in schizophrenia, which may facilitate the clinical intervention of negative symptoms.

Gender Differences in Executive Compensation on British Corporate Boards: the Role of Conditional Conservatism

We exploit the effectiveness of the [ Davies Report ( 2011 ). Women on Boards. London: Department for Business, Innovation &amp; Skills], which urged FTSE 350 companies to increase female representation on corporate boards, to examine the potential effect that this may have on the gender pay differential at the executive level. To this end, we employ a multivariate regression and a difference-in-differences approach that compare executive compensation between all-male executive boards and boards with at least one female executive. Using a sample of FTSE 350 companies that spans the period 2008–2015, we find that differential executive compensation exists in bonus and equity compensation following the Davies Report ( 2011 ). Given that the differential compensation exists in the components primarily determined by the firm’s reported earnings and that female directors are prone to exhibit higher conditional conservatism in their financial reporting, we examine whether the firm’s financial reporting practice plays a role in determining the differential executive compensation. Our investigation reveals that the presence of female executive directors on the board makes the effect of conditional conservatism more prominent, resulting in lower bonus and equity-based compensation.

Using loss aversion to incentivize energy efficiency in a principal–agent context — Evidence from a field experiment

Promoting energy-efficient behavior of agents in a principal–agent context simultaneously decreases costs for firms and mitigates CO2 emissions. Along this line, we analyze the effect of incentive framing on energy-efficient driving behavior. Our results contribute to the understanding of the drawbacks of loss framing. In a situation with persistent labor market relations, an extremely low bonus, and heterogeneous prior performance, the introduction of a bonus framed as a gain outperforms that of a bonus framed as a loss.

The Cost of a Bad Hire: On the Optimality of Pay to Quit Programs

Optimally reallocating human capital to tasks is key for an organization to successfully navigate a transition. We study how to design employment contracts to allocate employees to different valuable projects within an organization given two simultaneous challenges: The employees have private information about their own cost of effort, and they exert unobservable effort. The organization has two types of valuable projects, high and low impact, only the former of which requires effort. It would like to assign only an employee with low effort cost to the high-impact project. We characterize the optimal contract and show how it separates the employee types. The optimal contract menu pairs a higher probability of assignment to the high-impact project with a lower bonus in case of success. A fixed salary may also be used for the employees with high cost of effort, but only in limited cases. We link our results to job design features encountered in practice.

The Impact of Higher Fixed Pay and Lower Bonuses on Productivity

This study analyzes the effects of performance related pay on productivity exploiting a change in the payment structure of a large Dutch marketing company. Specifically, we investigate the consequences for company sales of higher fixed pay in combination with lower bonuses. Exploiting shift level data of individual workers we find that average productivity decreases when the pay structure shifts more to fixed pay. Further analysis shows that this drop in productivity is larger for older workers and for high-ability employees, while over time the negative effect of the new system becomes smaller.

Consumer evaluations of bonus packs offered with price discounts

PurposeThe purpose of this article is to assess consumer evaluations of bonus packs offered with price discounts.Design/methodology/approachFour laboratory experiments and a content analysis were conducted.FindingsThe opportunity to obtain a price discount was available for approximately 25 per cent of the bonus packs found in a content analysis. Consumers evaluated an offer containing a low bonus amount and a high price discount more positively than an offer containing a high bonus amount and a low price discount, despite both offers providing a similar underlying price per unit. Moreover, consumer evaluations of a bonus pack can be enhanced by providing a price discount rather than offering it at the regular price.Research limitations/implicationsFuture research could examine consumer reactions to bonus packs offered with discounts contingent on obtaining multiple quantities (e.g. BOGO; a multiple-unit price providing a lower price per unit than the single unit’s price) to determine whether the results of the present research extend to these situations.Practical implicationsManufacturers and retailers can evoke more positive consumer reactions to a bonus pack offered with a price discount if specifying a high amount for the latter rather than the former (if high amounts cannot be specified for both). It is possible for retailers to enhance consumer evaluations of a bonus pack by providing a price discount.Originality/valueThis research is the first to examine consumer evaluations of promotional offers containing both a bonus pack and a price discount.

Perception of Uninsured Person Towards the Life Insurance Policy

The study aims to explore the reason behind of unwillingness of purchasing life insurance policies. It also examines the differences on opinion of respondents and their level of education, income, expenditure, and fixed asset. A structured dichotomous questionnaire was used to obtain the perception of 300 uninsured respondents using purposive sampling method. Mode and Mann Whitney U test have been used to find the perception and difference on perception of respondents respectively. The study concluded that both financial and non-financial reasons affected the respondents. These are reasons likely to be the dependency over the relatives in the time of hardship, low bonus rate of life insurance, and sufficient property they have. Similarly, mistrusting psychology over life insurance, perceiving the low quality services of company, lack of convincing capacity of agents, and complex claims settlement process are seemed to be the non-financial causes. Inferential statistic show that level of education and expenditure do not make difference on perception of respondents but assets and income have shown the greater influence the perception of uninsured significantly. It has been suggested to concerned authority to increase the social faith over insurance by different means like awareness campaign, introducing the investment linked type product, improving the service quality and increasing the financial performance of the companies. Government should offer financial incentives to increase the demand of insurance product.

Executive Compensation and Ethnic Minority Status

We examine the compensation of ethnic minority executives in listed U.S. firms. The total pay of African American executives is 9 percent lower than that earned by Caucasians. This is due to lower base salary, lower bonus, and lower restricted stock grants. The lower bonus is due to a lower sensitivity to above‐average firm performance. African Americans also earn significantly less on the exercise of stock options, increasing the pay gap to 17 percent for total ex‐post pay. In contrast to African Americans, the compensation of Hispanic and Asian executives is comparable to Caucasians.

Executive compensation and informed trading in acquiring firms around merger announcements

This paper analyzes informed trading in acquiring firms through (stock) merger announcements. We show that pre-announcement abnormal option volumes in acquiring firms strongly increase ahead of a stock merger (by approximately 300%). Furthermore, we show that the direction of option trades (puts or calls) prior to an announcement can predict post-announcement stock returns. Our results also indicate that higher wealth-to-performance sensitivities of top executives are related to higher abnormal put than call option trading before stock merger announcements. Overall, our results support the view that top executives have a hedging motive. They tend to purchase protection against, e.g., confounding (negative) information policies and/or empire-building mergers with negative NPVs, in order to avoid short-term salary losses (lower bonuses, lower stock options, etc.).

Give and You Shall Receive: The Emergence of Welfare-Reducing Reciprocity

We develop a new experiment to study the emergence of welfare-reducing bilateral alliances within larger groups, and the effectiveness of institutional interventions to curtail this reciprocal alliance behaviour. In each of the 25 rounds of our experiments, a player (the 'allocator') nominates one of three others as a co-worker (the 'receiver'), which deter- mines the group production that period to be the productivity of the receiver (which varies by round), but also gives the receiver a bonus and makes them the allocator in the next round. Alliances then form if two individuals keep choosing each other even when their productivities are lower than that of others, causing efficiency losses. Males and business students are found to be more likely to form welfare reducing alliances. Random allocator rotation policies and low bonuses fail to significantly improve overall welfare: rotation policies significantly reduce the rate of formation of new alliances but do not lead to the breakdown of existing alliances, while low bonus policies are only found to be effective when alliances are well established. This points to the importance of the strength of existing alliances for the chances of institutional interventions curtailing welfare reducing reciprocity, i.e. 'back-scratching'.

Strikes and slowdown in a theory of relational contracts

We propose a model of strikes in a relational (or self-enforcing) contract framework. The employer has private information about firm profitability, proposes a wage and a bonus, and can outsource part of the production, in each period. The union can either go on strike or reduce the worker's effort (i.e., decide a slowdown or work-to-rule) as a response to a low wage or a low bonus. We construct perfect public equilibria in which strikes (or slowdown) appear randomly on the equilibrium path, during finite-duration spells triggered by the occurrence of a low-profitability state. Equilibria exhibit money-burning (i.e., conflict) and wage-compression as in the recent literature on relational contracts; they are first-best inefficient. We discuss empirical implications of the model and applications to the public sector. Paris dustmen are taken as an illustration. An important advantage of our theory is that it allows for equilibrium regime changes, induced by changes in the environment. Following a drop in outsourcing costs, strikes may disappear and be replaced by other forms of conflict that are less easily observable. This has consequences for the empirical work on strikes.

Executive Compensation and Informed Trading in Acquiring Firms Around Merger Announcements

This paper analyzes informed trading in acquiring firms through (stock) merger announcements. We show that pre-announcement abnormal option volumes in acquiring firms strongly increase ahead of a stock merger (by approximately 300%). Furthermore, we show that the direction of option trades (puts or calls) prior to an announcement can predict post-announcement stock returns. Our results also indicate that higher wealth-to-performance sensitivities of top executives are related to higher abnormal put option trading before stock merger announcements. Overall, our results support the view that top executives have a hedging motive. They tend to purchase protection against, e.g., confounding (negative) information policies and/or empire-building mergers with negative NPVs, in order to avoid short-term salary losses (lower bonuses, lower stock options, etc.).

Major League Baseball’s First Year Player Draft

Major League Baseball’s (MLB) Draft is a natural laboratory for the study of bargaining: There are no bonus restrictions, draft picks cannot be traded, and there are no commitment issues (i.e., players “declaring” for the draft). This article tests the implications of bargaining theory using data from the 2003-2010 MLB drafts. In 2007, new draft rules were introduced, but not uniformly across the draft, making it possible to estimate the effect of each change. Although the rule changes were designed to lower bonuses, they had the opposite effect. The rule changes led to $178 million in extra compensation to drafted players.

Big or Small: Compensation Consultant Selection, Switch and CEO Pay

Using a sample of U.S. S&P 1500 firms from 2007-2009, we provide new evidence showing that CEOs of firms engaging BIG6 consultants receive lower equity payments and lower total compensations compared to that of firms engaging SMALL consultants. In addition, we also find that a switch in a firm’s compensation consultants influences its CEO pay via two directions. When a firm switches its consultant from SMALL to BIG6 consultants (SMALL to BIG6), its CEO receives lower bonus, lower equity and lower total compensation. By contrast, when a firm switches its consultant from BIG6 to SMALL consultants (BIG6 to SMALL), its CEO receives higher salary, higher bonus, higher equity and higher total compensation. Our evidence supports the argument that big consultants tend to design more optimal contract to reduce CEO’s “excess pay” with their superior expertise on pay structure and concerns of high reputation cost.

The incentive to give incentives: On the relative seniority of debt claims and managerial compensation

We show that the relative seniority of debt and managerial compensation has important implications for the design of remuneration contracts. Whereas the traditional literature assumes that debt is senior to remuneration, there are in reality many cases in which remuneration contracts are de facto senior to debt claims in financially distressed firms and in workouts. We theoretically show that risky debt changes the incentive to provide the manager with performance-related incentives (a “contract substitution” effect). In other words, the relative degree of seniority of managers’ claims and creditors’ claims in case a bankruptcy procedure starts is crucial to determine the optimal incentive contract ex-ante. If managerial compensation is more senior than debt, higher leverage leads to lower power incentive schemes (lower bonuses and option grants) and a higher base salary. In contrast, when compensation is junior, we expect more emphasis on pay-for-performance incentives in highly-levered firms.

What drives home bias? Evidence from fund managers' views

AbstractA new survey of fund managers reveals home bias for these sophisticated investors in a setting being unrestricted by customer preferences or legal requirements. We confirm informational and behavioural determinants of home bias and find them to hold simultaneously. Further examinations of potential characteristics of home biased fund managers show that the perceived informational advantage does not need to be valid. Multivariate analyses indicate home bias being related to relative return optimism, overconfidence, higher age, lower bonus and less experience. Therefore, behavioural determinants contribute usefully towards an explanation of the home bias puzzle. Copyright © 2007 John Wiley &amp; Sons, Ltd.