Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/110266 
Year of Publication: 
2015
Series/Report no.: 
IMFS Working Paper Series No. 91
Publisher: 
Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS), Frankfurt a. M.
Abstract: 
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. We provide concrete conditions on economic primitives that make mandatory deferral socially (un)desirable.
Subjects: 
financial regulation
compensation design
principal-agent models
JEL: 
G28
G21
D86
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
467.77 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.