American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Corporate Tax Breaks and Executive Compensation
American Economic Journal: Economic Policy
(pp. 215–55)
Abstract
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.Citation
Ohrn, Eric. 2023. "Corporate Tax Breaks and Executive Compensation." American Economic Journal: Economic Policy 15 (3): 215–55. DOI: 10.1257/pol.20210155Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- M12 Personnel Management; Executives; Executive Compensation
- M52 Personnel Economics: Compensation and Compensation Methods and Their Effects