Quotation Bornemann, Tobias, Jacob, Martin, Sailer, Mariana. 2021. Do Corporate Taxes Affect Executive Compensation?




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.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Working/discussion paper, preprint
Language English
Title Do Corporate Taxes Affect Executive Compensation?
Year 2021
URL https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3403486


Bornemann, Tobias (Details)
Sailer, Mariana (Details)
Jacob, Martin (WHU - Otto Beisheim School of Management, Germany)
Management Accounting and Control Group AB (Details)
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