Response to Tax Law Changes Involving the Deductibility of Executive Compensation: A Model Explaining Corporate Behavior.
研究1993年《收入调节法案》限制高管薪酬税前扣除后，公司如何调整薪酬计划以保留税收优惠并降低政治成本，发现重新签约成本和CEO风险规避是放弃扣除的关键因素。
Abstract The Revenue Reconciliation Act of 1993 (hereafter RRA93) limits corporate tax deductions for executive compensation to $1 million per individual. Firms can avoid the limitation if compensation is based on a performance plan approved by share-holders. This study examines the modification by firms of their compensation plans, which would allow them to preserve their tax deductions while minimizing their political costs. Consistent with the Scholes and Wolfson (1992) paradigm, we test a multilateral model of employee-compensation contracting that considers all parties to the contract and incorporates both tax and non-tax elements. This study demonstrates that the decision to forgo the deduction can be explained by non-zero recontracting costs and executive risk aversion. The results show that the magnitude of the potential tax savings, firm size, the degree to which the CEO is overpaid relative to other CEOs in our sample, the pre-existing tie between pay and performance, and insider ownership, all positively affect the probability of conforming to RRA93.