Bonus taxes and international competition for bank managers

Abstract

We analyze the competition in bonus taxation when banks compensate their managers by means of fixed and incentive pay and bankers are internationally mobile. Banks choose bonus payments that induce excessive managerial risk-taking to maximize their private benefits of existing government bailout guarantees. In this setting the international competition in bonus taxes may feature a 'race to the bottom' or a 'race to the top', depending on whether bankers are a source of net positive tax revenue or inflict net fiscal losses on taxpayers as a result of incentive pay. A 'race to the top' becomes more likely when governments' impose only lax capital requirements on banks, whereas a 'race to the bottom' is more likely when bank losses are partly collectivized in a banking union.

The Economic and Social Dilemmas of Management Focused on the Future of Retail Branches of Commercial Banks in Poland

“…Therefore, a certain change should be pointed out that gives priority to building a culture of trust, bank-client relationships and a culture of management based on these foundations. Additional opinions expressed freely by the bank managers surveyed (MX) emphasized that the identified development factors are directly related to the quality of customer service and their satisfaction as a measure of the user's individual experience (UX) (Kieżel, 2016;Gietl and Haufler, 2018;Mbama et al, 2018;Sayil et al, 2019). These factors show that even the prospective implementation of blockchain technology and the automation of retail banking services will leave room for individual non-anonymous services and relationships built by managers of bank retail branches with their clients.…”

“…The basic research tool was the original questionnaire (Klus, 2014). From the supply perspective (Manager Experience, MX), the following were identified: the main competitors on the market, economic and social factors of building a competitive advantage and business models that could be used by bank retail branches in the future (Costa et al, 2006;Gietl and Haufler, 2018). The evaluation of the importance of identified factors [I(n)MX] was made on a scale of 1 to 5 (from [1] 'does not affect' to [5] 'has a key effect' with intermediate values).…”

Effectiveness and (In)Efficiencies of Compensation Regulation: Evidence from the EU Banker Bonus Cap

“…Skills can be better scaled in the financial industry compared to other sectors, which results in higher returns to human capital, in particular during times of deregulation (Philippon and Reshef, 2012;Célérier and Vallée, 2019). Skilled workers in the financial industry also tend to be highly mobile, possibly leading to tax competition across jurisdictions within a banking union to retain them (Gietl and Haufler, 2018). Van Boxtel (2017) discusses anecdotal evidence and provides a model that endogenizes compensation structure and risk-taking.…”

Taxing Mobile and Overconfident Top Earners

“…Our analysis of bonus payments and their taxation draws on the framework of Besley and Ghatak (2013). Gietl and Haufler (2018) have extended this setting to analyze international competition in bonus taxes when governments bail out failing banks.…”