CEO Inside Debt Incentives and Corporate Tax Sheltering

• 成果类型: Article
• 署名作者: Chi, Sabrina; Huang, Shawn X.; Sanchez, Juan Manuel
• 署名单位: Texas Tech University System; Texas Tech University; Arizona State University; Arizona State University-Tempe
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12169
• 发表日期: 2017
• 页码: 837-876
• 关键词: equity risk; JOB DEMANDS; COMPENSATION; firm; Aggressiveness; sensitivity; INVESTMENT; executives; avoidance; holdings

摘要

This paper examines the relation between CEO inside debt holdings (pension benefits and deferred compensation) and corporate tax sheltering. Because inside debt holdings are generally unsecured and unfunded liabilities of the firm, CEOs are exposed to risk similar to that faced by outside creditors. As such, theory (Jensen and Meckling [1976]) suggests that inside debt holdings negatively impact CEO risk-appetite. To the extent that corporate tax shelters are likely to result in high cash flow volatility in the future, we expect that inside debt holdings will curb CEOs from engaging in tax shelter transactions. Consistent with the prediction, we document a negative association between CEO inside debt holdings and tax sheltering. Additional analyses suggest that the effect of inside debt on tax sheltering is more (less) pronounced in the presence of high default risk and liquidity threats (cash-out options in pension packages). Overall, our results highlight the importance of investigating the implication of CEO debt-like compensation for corporate tax policies.