Working Paper: NBER ID: w21516
Authors: Aspen Gorry; Kevin A. Hassett; R. Glenn Hubbard; Aparna Mathur
Abstract: Given the increasing use of stock options in executive compensation, we examine how taxes influence the choice of compensation and document that income deferral is an important margin of adjustment in response to tax rate changes. To account for this option in the empirical analysis, we explore deferral by estimating how executives’ choice of compensation between current and deferred income depends on changes in tax policy. Our empirical results suggest a significant impact of taxes on the composition of executive compensation.
Keywords: executive compensation; tax rates; deferred income; stock options
JEL Codes: G30; H24; H32; J33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tax rates (H29) | deferred income (H24) |
| tax rates (H29) | choice of deferred compensation (M52) |
| tax price (H29) | option shares (G13) |
| tax price (H29) | stock grants share (G10) |
| tax rates (H29) | option shares (G13) |
| tax rates (H29) | stock grants share (G10) |