Journal
APPLIED ECONOMICS LETTERS
Volume 29, Issue 5, Pages 376-379Publisher
ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
DOI: 10.1080/13504851.2020.1869154
Keywords
Corporate tax; CEO pay; executive compensation; difference-in-difference
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This paper investigates the impact of state corporate tax rate changes on CEO pay, finding that tax cuts have a statistically significant effect on executive compensation among all publicly traded firms in the US, with a greater impact observed in the S&P 500 and S&P 100.
This paper is the first of its kind using the variation in state corporate tax rates to investigate if they have any explanatory power in predicting variations in CEO pay. Specifically, this paper allows us to shed light on whether corporate tax cuts boost CEO pay? This paper, by using a difference-in-difference (DID) set up over the period 1994 to 2015, finds that corporate tax cuts statistically affect CEO pay among all publicly traded firms in the US. The magnitude of the effect increases among the S&P 500 and S&P 100. The paper further presents some interesting findings using three different measures of executive compensation.
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