Affiliation:
1. University of Pennsylvania
2. Singapore Management University
Abstract
ABSTRACT
We examine the relation between managers' personal income tax rates and their corporate investment decisions. Using plausibly exogenous variation in federal and state tax rates, we find a positive relation between managers' personal tax rates and their corporate risk-taking. Moreover—and consistent with our theoretical predictions—we find that this relation is stronger among firms with investment opportunities that have a relatively high rate of return per unit of risk, and stronger among CEOs who have a relatively low marginal disutility of risk. Importantly, our results are unique to senior managers' tax rates––we do not find similar relations for middle-income tax rates. Collectively, our findings provide evidence that managers' personal income taxes influence their corporate risk-taking decisions.
JEL Classifications: G30; G32; G38; H24; H32.
Data Availability: Data are available from the sources cited in the text. Data on manager tax rates used in this paper are available at: http://acct.wharton.upenn.edu/∼dtayl/.
Publisher
American Accounting Association
Subject
Economics and Econometrics,Finance,Accounting
Cited by
47 articles.
订阅此论文施引文献
订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献