Locked-in : the effect of CEOs' capital gains taxes on corporate risk-taking
Name
1006379218-MIT.pdf
Description
Full printable version
Size
7.95 MB
Format
Adobe PDF
Checksum (MD5)
8c1fd189342a69317fb35dd1e95743e0
Author(s)
Yost, Benjamin Peter
Advisor(s)
John Core and Michelle Hanlon.
Alternative Title
Effect of Chief executive Officer's capital gains taxes on corporate risk-taking
Date Issued
2017
Publisher
Massachusetts Institute of Technology
Abstract
I study the effects of CEOs' unrealized capital gains tax liabilities (tax burdens) on corporate risk-taking. Recent work suggests that high tax burdens discourage CEOs from selling stock. I hypothesize that this causes the executives to become overexposed to firm-specific risk thereby reducing their willingness to make risky corporate decisions. In a series of tests, I find that corporate risk-taking decreases as CEOs' personal tax burdens increase. Further, firms with CEOs who are more locked-in to their stock positions (i.e., CEOs with higher tax burdens) experience larger increases in risk-taking following federal and state tax cuts. When I investigate the mechanism behind this relation, I find that tax cuts trigger stock sales by the locked-in executives, allowing for improved diversification. Overall, my findings indicate that the personal tax burdens of CEOs affect the firm by reducing executives' preferences for risk at the corporate level.
Description
Thesis: Ph. D., Massachusetts Institute of Technology, Sloan School of Management, 2017.
Cataloged from PDF version of thesis.
Includes bibliographical references (pages 43-47).
Subjects
Sloan School of Management.
MIT Department
Sloan School of Management
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