Firm-level tournament incentives and corporate tax aggressiveness

Theory and prior research suggests that tournament incentives promote greater risk-taking by senior executives in order to increase the likelihood of being promoted. In this study, we hypothesize and confirm that tournament incentives of the CFO are positively associated with measures of tax aggress...

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Bibliographic Details
Published in:Journal of accounting and public policy 2016-01, Vol.35 (1), p.66-83
Main Authors: Kubick, Thomas R., Masli, Adi N.S.
Format: Article
Language:English
Subjects:
Aggressiveness
Corporate taxes
Economic theory
Effects
Equity
Estimation
Executive compensation
Game theory
Incentives
Personal aggression
Risk
Studies
Taxation
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Summary:Theory and prior research suggests that tournament incentives promote greater risk-taking by senior executives in order to increase the likelihood of being promoted. In this study, we hypothesize and confirm that tournament incentives of the CFO are positively associated with measures of tax aggressiveness. We conduct numerous robustness tests, including instrumental variables estimation and firm fixed effects. Further, we find the effect of tournament incentives to be incremental to equity incentives. We conclude that tournament incentives have a meaningful impact on corporate tax aggressiveness.
ISSN:0278-4254
1873-2070
DOI:10.1016/j.jaccpubpol.2015.08.002