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Executive Compensation, Equity Risk Incentives, and Corporate Tax Aggressiveness - 27 March 2010, Social Science Research Network


This study examines the association between aggressive corporate tax avoidance and executive compensation practices. We find a positive relation between tax aggressiveness and the level of CEO and CFO equity-based compensation. This association is robust to controls for firm performance and board of directors’ characteristics. Because aggressive tax strategies involve significant uncertainty and can provide benefits to firms over an extended period of time, we predict that higher levels of equity risk incentives are necessary to motivate managers to undertake risky tax strategies. Consistent with this prediction, we find that equity risk incentives are positively associated with corporate tax aggressiveness.


Keywords: Tax aggressiveness, executive compensation, equity risk incentives

JEL Classifications: M41, H25, J33, M52, G34

Working Paper Series

Date posted: February 04, 2009 ; Last revised: March 27, 2010

Suggested Citation

, Executive Compensation, Equity Risk Incentives, and Corporate Tax Aggressiveness (January 27, 2010). Available at SSRN: http://ssrn.com/abstract=1337207

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