Managerial Short-Termism and Corporate Tax Avoidance
研究了CEO因短期股权激励而进行避税的行为，发现短视程度越高，企业避税越多，这损害长期股东财富，但增加短期股价收益。
Synopsis The research problem This paper examines the relationship between managerial myopia (or short-termism) and corporate tax avoidance. The main purpose is to explore whether CEOs with short-term equity incentives engage in tax avoidance to maximize private benefits at the expense of long-term shareholder wealth. Motivation Managerial short-termism arises when executives prioritize short-term stock price performance over long-term firm value. Prior research has suggested that short-term equity incentives lead to myopic decisions, such as cutting R&D expenditures or engaging in earnings management. This study extends this literature by investigating whether CEOs use corporate tax avoidance as a tool for short-termism. Unlike prior studies that examined tax avoidance within an efficient contracting framework, this study highlights how short-term wealth incentives induce tax avoidance that benefits executives but potentially harms long-term firm value. The test hypotheses This study examines whether managerial myopia is associated with corporate tax avoidance. In particular, the analysis evaluates whether managerial myopia is positively associated with corporate tax avoidance ([Formula: see text]) or, alternatively, negatively associated with corporate tax avoidance ([Formula: see text]). Target population Various stakeholders interested in corporate tax avoidance, including policymakers, compensation consultants, board of directors, investors, and firm managers. Adopted methodology Multivariate analyses using ordinary least squares, two-stage least squares, panel logit, as well as event-study Difference-in-Differences regressions. Analyses We examined 10,940 firm-CEO-year observations from Russell 3000 firms between 2006 and 2016. Corporate tax avoidance refers to strategies that reduce tax payments relative to pretax income, ( Blouin , 2014 ) measured using annual cash effective tax rates (ETR) to capture short-term within-firm tax variations. Managerial myopia, defined as the CEO’s focus on short-term stock performance ( Edmans, Fang et al. , 2017 ), is proxied by vesting equity delta scaled by annual compensation, which quantifies the sensitivity of vesting equity to changes in firm value ( Edmans et al. , 2009 ). Findings The results indicate that vesting equity delta is associated with declines in cash ETR, supporting H[Formula: see text]. Each standard deviation increase in vesting equity delta is associated with a 0.80–1.54 percentage points drop in cash ETR, translating into a $5.71m–$10.99[Formula: see text]m reduction in annual tax payments for the average firm. We also identify CEO equity sales and mispricing potential as the underlying economic mechanisms. Additional analyses indicate that vesting equity induces costly tax avoidance, which is positively (negatively) associated with short-term (long-term) shareholder wealth. We address endogeneity concerns by using vesting schedules determined several years prior and options acceleration before the adoption of FAS 123R as events plausibly exogenous to the current corporate tax avoidance environment.