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

Petutschnig, Matthias (2017) Regulatory Compensation Limits and Business Performance - Evidence from the National Football League. WU International Taxation Research Paper Series, 2017-06. WU Vienna University of Economics and Business, Universität Wien, Vienna.


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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.

Item Type: Paper
Additional Information: Editors: Eva Eberhartinger, Michael Lang, Rupert Sausgruber and Martin Zagler (Vienna University of Economics and Business), and Erich Kirchler (University of Vienna)
Keywords: CEO, compensation, executive, maximum wage, tax
Classification Codes: JEL M12, M52, H24, H71, J33
Depositing User: ePub Administrator
Date Deposited: 26 May 2017 10:11
Last Modified: 22 Oct 2019 00:41


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