Executives' Financial Preferences and Shareholder Tax Outcomes

45 Pages Posted: 24 Nov 2014 Last revised: 23 Feb 2019

See all articles by Gerardo Perez Cavazos

Gerardo Perez Cavazos

University of California, San Diego (UCSD)

Andreya Silva


Date Written: January 1, 2017


We demonstrate that executives’ personal financial preferences impact both layers of shareholder taxes, corporate taxes and corporate payouts. We reconstruct executives’ insider equity portfolios to quantify their personal incentives and analyze stock sales that reveal their personal preferences to incorporate tax strategy in their financial decisions. We find that 2,281 executives strategically realize their built-in capital gains prior to the 2013 tax hikes to save nearly $741 million in personal taxes. These executives reduce their shareholders’ tax burdens in an economically meaningful way. Specifically, before the same 2013 tax hike they saved shareholders over $700 million in taxes by distributing $8 billion in special and accelerated dividends. In addition, on average, the presence of each tax-strategic executive further lowers shareholder taxes by lessening the firm’s long-run cash effective tax rate by 43 basis points.

Keywords: Managerial preferences, capital gains, dividends, tax avoidance.

JEL Classification: G35, H24, H25, K34

Suggested Citation

Perez Cavazos, Gerardo and Silva, Andreya, Executives' Financial Preferences and Shareholder Tax Outcomes (January 1, 2017). Available at SSRN: https://ssrn.com/abstract= or http://dx.doi.org/10.2139/ssrn.2529509

Gerardo Perez Cavazos (Contact Author)

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
La Jolla, CA 92093
United States

Andreya Silva

Independent ( email )

Do you want regular updates from SSRN on Twitter?

Paper statistics

Abstract Views
PlumX Metrics