Organizational Form, Taxes, Ownership, and CEO Compensation: Evidence from Small Businesses

30 Pages Posted: 10 Apr 2010

See all articles by Rebel A. Cole

Rebel A. Cole

Florida Atlantic University

Hamid Mehran

Independent

Date Written: December 31, 1996

Abstract

This study examines the determinants of CEO compensation using data from a nationally representative sample of non-publicly traded corporations. We find that CEO compensation is higher at C corporations than at S corporations, consistent with view that CEOs of small firms can reduce the effect of double taxation by distributing profits via tax-deductible compensation expense. We also find that CEO compensation increases at a decreasing rate with CEO stock ownership; increases with the firm’s capitalization as measured by the ratio of equity to assets; and increases with firm size as measured by annual sales or total employment. Finally, we find that there are significant differences in CEO compensation across industrial classifications.

Keywords: business taxes, CEO pay, corporation, executive compensation, organizational form, ownership, personal taxes, privately held, SSBF

JEL Classification: H24, H25, G32, J33

Suggested Citation

Cole, Rebel A. and Mehran, Hamid, Organizational Form, Taxes, Ownership, and CEO Compensation: Evidence from Small Businesses (December 31, 1996). Available at SSRN: https://ssrn.com/abstract=1586515 or http://dx.doi.org/10.2139/ssrn.1586515

Rebel A. Cole (Contact Author)

Florida Atlantic University ( email )

College of Business
777 Glades Road
Boca Raton, FL 33431
United States
1-561-297-4969 (Phone)

HOME PAGE: http://rebelcole.com

Hamid Mehran

Independent ( email )

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