Corporate Tax Breaks and Executive Compensation

Eric Ohrn

American Economic Journal: Economic Policy, 2023, vol. 15, issue 3, 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.

JEL-codes: D22 G34 H25 M12 M52 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1257/pol.20210155

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