TY - UNPB
T1 - Do Corporate Taxes Affect Executive Compensation?
AU - Bornemann, Tobias
AU - Jacob, Martin
AU - Sailer, Mariana
PY - 2021/2/23
Y1 - 2021/2/23
N2 - The limitation of executive compensation has been a matter of public and policy debate for at least 20 years. We examine a first-time regulatory action where the deductibility of the total value of executive compensation is unavoidably limited. We find no average effects on pay growth for executives. However, pay growth decreases for new executives and very distinct groups of incumbent managers, indicating that they are affected by the deductibility limit. Additionally, the contract durations of incumbent executives decrease after renegotiation. We further find that affected firms experience cuts in investment and research and development. Our results could shed light on other reforms, such as the Tax Cuts and Jobs Act of 2017, indicating that the effectiveness of such reforms in restricting executive pay is rather limited.
AB - The limitation of executive compensation has been a matter of public and policy debate for at least 20 years. We examine a first-time regulatory action where the deductibility of the total value of executive compensation is unavoidably limited. We find no average effects on pay growth for executives. However, pay growth decreases for new executives and very distinct groups of incumbent managers, indicating that they are affected by the deductibility limit. Additionally, the contract durations of incumbent executives decrease after renegotiation. We further find that affected firms experience cuts in investment and research and development. Our results could shed light on other reforms, such as the Tax Cuts and Jobs Act of 2017, indicating that the effectiveness of such reforms in restricting executive pay is rather limited.
UR - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3403486
U2 - 10.2139/ssrn.3403486
DO - 10.2139/ssrn.3403486
M3 - WU Working Paper
T3 - WU International Taxation Research Paper Series
BT - Do Corporate Taxes Affect Executive Compensation?
PB - WU Vienna University of Economics and Business
CY - Vienna
ER -