S-Space College of Business Administration/Business School (경영대학/대학원) Dept. of Business Administration (경영학과) Theses (Master's Degree_경영학과)
CEO Compensation Incentives and Tax Avoidance
- 경영대학 경영학과
- Issue Date
- 서울대학교 대학원
- 학위논문 (석사)-- 서울대학교 대학원 : 경영학과, 2014. 2. 정운오.
- This paper investigates whether firms tax avoidance differs depending on the level of CEO compensation incentives. Prior literature shows mixed results for the relationship between CEO incentives and tax avoidance – either positive or negative. The purpose of this paper is to find the reason for this opposite sign, and find the true underlying shape of the relationship. Under low levels of CEO incentives, increasing pay-performance-sensitivity leads to more tax avoidance, leading to lower ETR. However, very high levels of incentives should lead to firms reducing R&D expenditures, one of commonly used tax-favored activities, thereby increasing ETR. This leads to a U-shaped relation between CEO incentives and effective tax rates. In addition, I also document that this U-shaped relation is stronger for firms under weak corporate governance.