Pay for(eign) performance: CEO pay incentives for foreign tax savings

• 成果类型: Article
• 署名作者: Boylen, Kathleen; Gaertner, Fabio B.; Martin, Melissa A.
• 署名单位: California State University System; California State University Northridge; University of Wisconsin System; University of Wisconsin Madison; University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101; 1879-1980
• DOI: 10.1016/j.jacceco.2026.101903
• 发表日期: 2026-11
• 页码: 101903
• 关键词: ceo compensation; corporate taxation; Tax reform; Tax Cuts and Jobs Act; COMPENSATION; earnings; plans

摘要

This paper investigates the relation between executive compensation and corporate tax policies, with a focus on the Tax Cuts and Jobs Act of 2017 (TCJA). Using a pay-performance sensitivity framework, we analyze the differing compensation rewards associated with domestic and foreign pre-tax incomes. Our findings reveal that, before the TCJA, executives received significantly higher rewards for foreign income, encouraging them to shift income abroad. The TCJA reduced this disparity, bringing rewards for domestic and foreign income into closer alignment. A cross-sectional analysis shows that firms assessing CEO performance based on after-tax income exhibit greater sensitivity to changes in tax policy, establishing the presence of a tax mechanism. Additional tests eliminate alternative nontax explanations related to protectionist trade policies and changes in foreign market growth opportunities. These results highlight the significant impact of executive incentives on corporate tax behavior and the effectiveness of tax policy reforms.