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  Too Many to Fail - How Bonus Taxation Prevents Gambling for Bailouts

Hilmer, M. (2014). Too Many to Fail - How Bonus Taxation Prevents Gambling for Bailouts. Working Paper of the Max Planck Institute for Tax Law and Public Finance, No. 2014-18.

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externe Referenz:
http://ssrn.com/abstract=2506526 (Zusammenfassung)
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 Urheber:
Hilmer, Michael1, Autor           
Affiliations:
1Public Economics, MPI for Tax Law and Public Finance, Max Planck Society, ou_830552              

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Schlagwörter: Bonus Tax, Executive Compensation, Bailout, Systemic Risk, Too Many To Fail, Collective
 Zusammenfassung: Using a simple symmetric principal-agent model with two banks, we study the effects of both bailouts and bonus taxes on risk taking and managerial compensation. We assume financial institutions to be systemic only on a collective basis, implying support with bailouts only if they both fail collectively. This too-many-to-fail assumption generates incentives for herding and collective moral hazard. If banks can anticipate bailouts, they can coordinate on an equilibrium in which they collectively incentivize higher risk-taking. A bonus tax can prevent this excessive risk-taking, even if it is implemented unilaterally: proper bonus taxation reduces risk-taking of the taxed bank(s) and, consequentially, rules out the equilibrium with excessive risk-taking of both banks and reestablishes market discipline.

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Sprache(n): eng - English
 Datum: 2014-10-07
 Publikationsstatus: Online veröffentlicht
 Seiten: 26
 Ort, Verlag, Ausgabe: -
 Inhaltsverzeichnis: -
 Art der Begutachtung: -
 Identifikatoren: SSRN: 2506526
 Art des Abschluß: -

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Titel: Working Paper of the Max Planck Institute for Tax Law and Public Finance
Genre der Quelle: Reihe
 Urheber:
Affiliations:
Ort, Verlag, Ausgabe: -
Seiten: - Band / Heft: No. 2014-18 Artikelnummer: - Start- / Endseite: - Identifikator: -