CEO After-tax Compensation Incentives and Corporate Tax Avoidance
I examine the association between CEOs' after-tax incentives and their firms' levels of tax avoidance. Economic theory holds that firms should compensate CEOs on an after-tax basis when the expected tax savings generated from incentive alignment outweigh the incremental compensation demand...
Main Author: | |
---|---|
Other Authors: | |
Language: | en |
Published: |
The University of Arizona.
2011
|
Online Access: | http://hdl.handle.net/10150/145277 |
id |
ndltd-arizona.edu-oai-arizona.openrepository.com-10150-145277 |
---|---|
record_format |
oai_dc |
spelling |
ndltd-arizona.edu-oai-arizona.openrepository.com-10150-1452772015-10-23T04:27:00Z CEO After-tax Compensation Incentives and Corporate Tax Avoidance Gaertner, Fabio B. Dhaliwal, Dan S. Dhaliwal, Dan S. Eldenburg, Leslie G. Bens, Daniel A. Cook, Kirsten A. I examine the association between CEOs' after-tax incentives and their firms' levels of tax avoidance. Economic theory holds that firms should compensate CEOs on an after-tax basis when the expected tax savings generated from incentive alignment outweigh the incremental compensation demanded by CEOs for bearing additional tax-related compensation risk. Using publicly available data, I estimate CEOs' after-tax incentives and find a negative relation between the use of after-tax incentives and effective tax rates. While the results suggest that greater use of after-tax measures in CEO compensation leads to higher tax savings, it is possible that these savings will lead to lower pre-tax returns, or implicit taxes. Therefore, I also examine the association between the use of after-tax incentives and implicit taxes and find a positive association between the two. Finally, I find a significant positive relation between after-tax incentives and total CEO compensation, suggesting that CEOs who are compensated after-tax demand a premium for the additional risk they bear. 2011 Electronic Dissertation text http://hdl.handle.net/10150/145277 752261359 11489 en Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author. The University of Arizona. |
collection |
NDLTD |
language |
en |
sources |
NDLTD |
description |
I examine the association between CEOs' after-tax incentives and their firms' levels of tax avoidance. Economic theory holds that firms should compensate CEOs on an after-tax basis when the expected tax savings generated from incentive alignment outweigh the incremental compensation demanded by CEOs for bearing additional tax-related compensation risk. Using publicly available data, I estimate CEOs' after-tax incentives and find a negative relation between the use of after-tax incentives and effective tax rates. While the results suggest that greater use of after-tax measures in CEO compensation leads to higher tax savings, it is possible that these savings will lead to lower pre-tax returns, or implicit taxes. Therefore, I also examine the association between the use of after-tax incentives and implicit taxes and find a positive association between the two. Finally, I find a significant positive relation between after-tax incentives and total CEO compensation, suggesting that CEOs who are compensated after-tax demand a premium for the additional risk they bear. |
author2 |
Dhaliwal, Dan S. |
author_facet |
Dhaliwal, Dan S. Gaertner, Fabio B. |
author |
Gaertner, Fabio B. |
spellingShingle |
Gaertner, Fabio B. CEO After-tax Compensation Incentives and Corporate Tax Avoidance |
author_sort |
Gaertner, Fabio B. |
title |
CEO After-tax Compensation Incentives and Corporate Tax Avoidance |
title_short |
CEO After-tax Compensation Incentives and Corporate Tax Avoidance |
title_full |
CEO After-tax Compensation Incentives and Corporate Tax Avoidance |
title_fullStr |
CEO After-tax Compensation Incentives and Corporate Tax Avoidance |
title_full_unstemmed |
CEO After-tax Compensation Incentives and Corporate Tax Avoidance |
title_sort |
ceo after-tax compensation incentives and corporate tax avoidance |
publisher |
The University of Arizona. |
publishDate |
2011 |
url |
http://hdl.handle.net/10150/145277 |
work_keys_str_mv |
AT gaertnerfabiob ceoaftertaxcompensationincentivesandcorporatetaxavoidance |
_version_ |
1718096939996676096 |