Corporate tax breaks and executive compensation by Eric Ohrn
By: Ohrn, Eric
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Material type: 
ArticleSubject(s): IMPUESTO DE SOCIEDADES | EXENCIONES TRIBUTARIAS | REDUCCIONES TRIBUTARIAS | ADMINISTRADORES DE SOCIEDADES | SALARIOS | ESTADOS UNIDOS
In:
American Economic Journal : Economic Policy v. 15, n. 3, August 2023, p. 215-255Summary: I analyze the effect of two corporate tax breaks, bonus depreciation and the Domestic Production Activities Deduction (DPAD), on executive compensation in publicly traded US firms. I find both tax breaks significantly increase executive compensation. For every dollar a firm benefits from the tax breaks, compensation of the firm's top five highest-paid executives increases by $0.17 to $0.25. The tax breaks increase compensation primarily in firms with weaker governance structures, suggesting the compensation response is driven by executive rent extraction.
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| OP 2135/2023/3-2 Common practice | OP 2135/2023/3-3 Spending responses to high-frequency shifts in payment timing | OP 2135/2023/3-4 How Social Security reform affects retirement and pension claiming | OP 2135/2023/3-5 Corporate tax breaks and executive compensation | OP 2135/2023/4 American Economic Journal : Economic Policy | OP 2135/2023/4-1 Public pension reforms and retirement decisions | OP 2135/2023/4-2 Do tax incentives increase firm innovation? |
Resumen.
Bibliografía.
I analyze the effect of two corporate tax breaks, bonus depreciation and the Domestic Production Activities Deduction (DPAD), on executive compensation in publicly traded US firms. I find both tax breaks significantly increase executive compensation. For every dollar a firm benefits from the tax breaks, compensation of the firm's top five highest-paid executives increases by $0.17 to $0.25. The tax breaks increase compensation primarily in firms with weaker governance structures, suggesting the compensation response is driven by executive rent extraction.
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