Regulatory Compensation Limits and Business Performance – Evidence from the National Football League

37 Pages Posted: 24 May 2017

See all articles by Matthias Petutschnig

Matthias Petutschnig

Vienna University of Economics and Business

Date Written: May 2017

Abstract

Executives’ compensation has been on the forefront of the public and political debate since the recent financial crisis. One of the measures publicly discussed is a general upper boundary to top management compensation packages (“salary cap”, “maximum wage”). While such measures are novelties to the corporate world, the North American major sports leagues have been using maximum compensation regulations for decades. This paper exploits the 23-year experience with salary cap regulations from the National Football League (NFL). The results show a significant negative relation between the success of NFL teams and the amount of the net (after-tax) salary cap represented by the personal income tax rate of the teams’ home states. A team from California (highest average tax rate) wins 2.256 games less per year and has an 11% reduced probability of making the playoffs than a team located in a no-tax state such as Florida or Texas. The paper contributes to and informs the ongoing public and political debate regarding the regulation of executive compensation, and its effects on the performance of the regulated entities.

Keywords: CEO, Compensation, Executive, Maximum Wage, Tax

JEL Classification: M12, M52, H24, H71, J33

Suggested Citation

Petutschnig, Matthias, Regulatory Compensation Limits and Business Performance – Evidence from the National Football League (May 2017). WU International Taxation Research Paper Series No. 2017-06. Available at SSRN: https://ssrn.com/abstract=2972655 or http://dx.doi.org/10.2139/ssrn.2972655

Matthias Petutschnig (Contact Author)

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Building D 3
Vienna, Wien A-1020
Austria

HOME PAGE: http://www.wu.ac.at

Register to save articles to
your library

Register

Paper statistics

Downloads
108
Abstract Views
1,082
rank
255,350
PlumX Metrics