EXPLAINING COMBINED INCENTIVE CONTRACTS' CHOICES: CLAWBACK CONTRACTS

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MEHRANI SASAN; MOTMAEN MOHSEN

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Journal: MANAGEMENT ACCOUNTING Year:2018 | Volume:11 | Issue:37 Page(s): 29-40

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Information Journal Paper

Title

EXPLAINING COMBINED INCENTIVE CONTRACTS' CHOICES: CLAWBACK CONTRACTS

Author(s)

MEHRANI SASAN | MOTMAEN MOHSEN | Issue Writer Certificate

Keywords

LOSS AVERSIONQ1

CLAWBACK CONTRACTSQ1

MANAGEMENT ACCOUNTINGQ2

FRAMINGQ1

Abstract

This study explains the individual’s behavior toward profits and losses contained in differently framed combined incentive contracts. Individual’s risk preferences and loss preferences are measured using Holt and Laury (2002) measure of risk aversion and Brink and Rankin (2013) measure of LOSS AVERSION, respectively. The last measure was adjusted with compensation characteristics in Iran. The relationship between these preferences and individual’s behavior under economically equivalent contracts of different frames is examined using experiment. Participating 92 subjects as well as conducting four separate experiments, the result indicated that there is a negative relationship between LOSS AVERSION and accepatance of contracts which have penalty component. Also, subjects preferred the first clawback contract (bonus> penalty) rather than the second clawback contract (bonus< penalty). In other words, contracts FRAMING as well as endowment effect play a vital role in individual choices. Failure of common economic theories in explaining of individual behavior is confirmed in this study.

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APA: Copy

MEHRANI, SASAN, & MOTMAEN, MOHSEN. (2018). EXPLAINING COMBINED INCENTIVE CONTRACTS' CHOICES: CLAWBACK CONTRACTS. MANAGEMENT ACCOUNTING, 11(37 ), 29-40. SID. https://sid.ir/paper/198775/en

Vancouver: Copy

MEHRANI SASAN, MOTMAEN MOHSEN. EXPLAINING COMBINED INCENTIVE CONTRACTS' CHOICES: CLAWBACK CONTRACTS. MANAGEMENT ACCOUNTING[Internet]. 2018;11(37 ):29-40. Available from: https://sid.ir/paper/198775/en

IEEE: Copy

SASAN MEHRANI, and MOHSEN MOTMAEN, “EXPLAINING COMBINED INCENTIVE CONTRACTS' CHOICES: CLAWBACK CONTRACTS,” MANAGEMENT ACCOUNTING, vol. 11, no. 37 , pp. 29–40, 2018, [Online]. Available: https://sid.ir/paper/198775/en

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