Research Project

Clawback Clauses as a Strategic Handicap?

Due to legal frameworks and demands from investors, an increase in clawback clauses in executive board contracts is expected in Germany. The implementation of this clause, which allows the recovery of previously paid variable compensation, is intended to prevent short-term, value-destructive behavior by board members.



While previous analyses by other researchers have primarily focused on examining the desired effects (e.g., improved reporting quality or fewer financial restatements) of clawback implementations, potential undesired effects have largely been neglected. Therefore, the aim of this study, conducted in collaboration with the University of Groningen, is to investigate the potential undesired effects of clawback implementation on the strategic orientation of companies. For this purpose, data from nearly 1,000 publicly traded U.S. companies over a period of more than ten years is analyzed. The following results can be observed:

• The introduction of a clawback clause reduces a company’s strategic repertoire by an average of six percent


• This effect is even more pronounced with certain designs of the clawback clause and in specific corporate situations


• The reduction in strategic repertoire poses a threat to the long-term development of the company

Below you can find the detailed study:

• Clawback Clauses as a Strategic Handicap? (PDF)

Press coverage:

• Managers Reduce Strategic Repertoire (PDF) - Börsen-Zeitung, 26.06.2020