NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Response of Deferred Executive Compensation to Changes in Tax Rates

Aspen Gorry, Kevin A. Hassett, R. Glenn Hubbard, Aparna Mathur

NBER Working Paper No. 21516
Issued in September 2015
NBER Program(s):Public Economics

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.

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Document Object Identifier (DOI): 10.3386/w21516

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