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The Incentives for Tax Planning
Chris Armstrong
University of Pennsylvania - Accounting Department
Jennifer L. Blouin
University of Pennsylvania - Accounting Department
David F. Larcker
Stanford University - Graduate School of Business
March 8, 2011
Journal of Accounting and Economics, Volume 53, Issues 1–2, (Feb–April 2012): 391-411.
Rock Center for Corporate Governance at Stanford University Working Paper No. 56
Stanford Graduate School of Business Research Paper No. 2032
Abstract:
We use a proprietary data set with detailed executive compensation information to examine the relationship between the incentives of the tax director and GAAP and cash effective tax rates, the book-tax gap, and measures of tax aggressiveness. We find that the incentive compensation of the tax director exhibits a strong negative relationship with the GAAP effective tax rate, but little relationship with the other tax attributes. We interpret these results as indicating that tax directors are provided with incentives to reduce the level of tax expense reported in the financial statements.
Number of Pages in PDF File: 53
Keywords: tax director incentives, effective tax rate, book-tax difference
JEL Classification: H25, J33, M41, M52
Accepted Paper Series
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Date posted: June 10, 2009
; Last revised: November 6, 2012
Suggested CitationArmstrong, Chris S., Blouin, Jennifer L. and Larcker, David F., The Incentives for Tax Planning (March 8, 2011). Rock Center for Corporate Governance at Stanford University Working Paper No. 56; Journal of Accounting and Economics, Volume 53, Issues 1–2, (Feb–April 2012): 391-411. ; Rock Center for Corporate Governance at Stanford University Working Paper No. 56; Stanford Graduate School of Business Research Paper No. 2032. Available at SSRN: http://ssrn.com/abstract=1416422
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