Agent and Principal

Spremann, Klaus

doi:10.1007/978-3-642-75060-1_2

Cited by 163 publications

(46 citation statements)

References 16 publications

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“…Many of the papers in the agency-tax literature are based on the LEN model that was first presented by Spremann (1987). The main advantage of this approach is the existence of analytical solutions for the underlying contract problem.…”

Section: Introductionmentioning

confidence: 99%

The impact of taxation on international assignment decisions: a principal–agent approach

Martini

Niemann

2014

Rev Manag Sci

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Impact of Taxation on International Assignment Decisions -A Principal-Agent Approach Terms of use: Documents in AbstractIn many industries like management consulting, IT consulting, or construction highly qualified employees, i.e., experts or executive managers, have to be assigned to temporary projects. In firms with many employees and various different projects, this assignment decision involves a complex optimization procedure. Obviously, the employees' productivities in the respective projects are crucial for the employer's optimal assignment decision, but assignment can also be affected by risk-incentive trade-offs. Moreover, taxation can alter the assignment decision, especially if employees are sent abroad as expatriates so that international tax law has to be taken into account. To address these issues simultaneously, we combine a human resource assignment problem with a principal-agent problem of the LEN type. Both wage taxation at the agents' level and corporate taxation at the principal's level are integrated. We show that national tax rules as well as the methods for avoiding double taxation and the agents' tax characteristics are important determinants for international assignment decisions. The effects of tax rate variations can be ambiguous and depend on whether the exemption method or the credit method are applied, in particular if agents make differing choices of residence. From a tax policy perspective, the exemption method should be preferred because the tax effects are more transparent than under the credit method. Special deductions for incoming expatriates have only little effects on the optimal assignment decision.JEL-Code: H240, H250, M410.

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Section: Introductionmentioning

confidence: 99%

The impact of taxation on international assignment decisions: a principal–agent approach

Martini

Niemann

2014

Rev Manag Sci

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“…8 LEN is an acronym for linear agent's compensation function and linear production function, exponential agent's utility function and normally distributed noise terms, see e.g. Spremann (1987).…”

Section: Introductionmentioning

confidence: 99%

Management Incentives Under Formula Apportionment Tax-Induced Distortions of Effort and Compensation in a Principal-Agent Setting

2014

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The introduction of a common consolidated corporate tax base (CCCTB) and tax allocation via formula apportionment (FA) is hotly debated in the European Union (EU) since more than a decade. While the literature has thoroughly analyzed the economic effects of FA from a macro-level perspective, the firm view has been added only recently. Within this micro-level framework discussing possible tax-induced distortions of multi-jurisdictional entities' (MJE) decisions becomes feasible. Anticipating the reactions of MJEs to the introduction of FA requires considering delegation and incentivisation, because management decisions are influenced by principal agent relationships. How FA affects the demand for managerial effort is a hitherto neglected research question. Accordingly, the objective of this paper is to highlight the tax-induced distortions of managerial incentives caused by FA. For this purpose we set up a LEN-type principal-agent model with agents in two different jurisdictions. Terms of use: Documents inCompared to the case with separate taxation (ST) the principal demands increased effort and pays an increased compensation to managers in low-tax jurisdictions, if payroll enters the FA formula. Managers in high-tax jurisdictions face the opposite effect. Further, the composition of the compensation packages changes. Overall, net profit increases, because FA offers potential for profit shifting.JEL-Code: H250, M410.

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“…Agency models describing the asymmetric relationship between an agent, who carries out a task, and a principal, on whose behalf the task is carried out, have developed into a powerful framework for analysing many problems in organization theory (Spremann, 1987). Since agency theory is rooted in traditional economic analysis, it also inherits many of its limitations (Nilakant and Rao, 1994).…”

Section: Introductionmentioning

confidence: 99%