Taxation and executive compensation: Evidence from stock options

Andrew Bird

Journal of Financial Economics, 2018, vol. 127, issue 2, 285-302

Abstract: Understanding the effects of taxes on executive compensation provides insight into the process determining this compensation and is a key input to top income tax rate policy. A 2010 tax reform in Canada, which greatly increased the effective tax rate on stock option compensation for a subset of firms, provides a natural experiment with which to address this issue. Difference-in-differences estimates suggest that this tax increase resulted in an immediate reduction in both stock option grants and the fraction of total compensation made up of stock options with limited, if any, substitution towards other components of compensation.

Keywords: Executive compensation; Taxation; Stock options (search for similar items in EconPapers)
JEL-codes: H2 J33 M12 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:127:y:2018:i:2:p:285-302

DOI: 10.1016/j.jfineco.2017.11.006

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