Please use this identifier to cite or link to this item: http://hdl.handle.net/10125/64841

Executive Equity Compensation and Tax Avoidance: The Effect of Firm Size

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Title:Executive Equity Compensation and Tax Avoidance: The Effect of Firm Size
Authors:Herita Akamah
Rebecca Perez
Keywords:Equity Compensation
Execucomp companies
Tax Avoidance
Firm Size
Date Issued:26 Aug 2019
Abstract:This study examines whether executive equity-based compensation provides incentives to engage in greater tax avoidance. Relying on agency and tax exhaustion theories, we posit that the relation between equity compensation and tax avoidance is more positive in smaller firms than in larger firms. Using a recently available compensation database, which includes a much broader universe of companies, we find that tax avoidance is increasing in equity incentives, but only in smaller firms. These results suggest that differences in firm size and the resulting implication for the association between equity compensation and tax avoidance at least partially explain why some empirical tests based on large-firm samples fail to corroborate economic theory. We provide the novel insight that size is a boundary condition that reconciles the seemingly conflicting agency and tax exhaustion theories with respect to the relation between equity compensation and tax avoidance.
URI:http://hdl.handle.net/10125/64841
Appears in Collections: 17 Management Accounting: Executive Compensation/Corporate Governance


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