The Response of Deferred Executive Compensation to Changes in Tax Rates

41 Pages Posted: 8 Sep 2015 Last revised: 17 Oct 2021

See all articles by Aspen Gorry

Aspen Gorry

John E. Walker Department of Economics

Kevin A. Hassett

American Enterprise Institute (AEI)

R. Glenn Hubbard

Columbia University

Aparna Mathur

American Enterprise Institute (AEI)

Date Written: September 2015

Abstract

Given the increasing use of stock options in executive compensation, we examine how taxes influence the choice of compensation and document that income deferral is an important margin of adjustment in response to tax rate changes. To account for this option in the empirical analysis, we explore deferral by estimating how executives’ choice of compensation between current and deferred income depends on changes in tax policy. Our empirical results suggest a significant impact of taxes on the composition of executive compensation.

Suggested Citation

Gorry, Aspen and Hassett, Kevin A. and Hubbard, R. Glenn and Mathur, Aparna, The Response of Deferred Executive Compensation to Changes in Tax Rates (September 2015). Available at SSRN: https://ssrn.com/abstract=2656899

Aspen Gorry (Contact Author)

John E. Walker Department of Economics ( email )

228 Sirrine Hall
Clemson, SC 29634
United States

Kevin A. Hassett

American Enterprise Institute (AEI) ( email )

1150 17th Street, N.W.
Washington, DC 20036
United States
202.862.7157 (Phone)
202.862.7177 (Fax)

R. Glenn Hubbard

Columbia University

Aparna Mathur

American Enterprise Institute (AEI) ( email )

1150 17th Street, N.W.
Washington, DC 20036
United States
202-868-6026 (Phone)

HOME PAGE: http://www.aei.org/scholar/aparna-mathur/

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