Executive compensation, individual-level tax rates, and insider trading profits

IF 5.4 1区管理学 Q1 BUSINESS, FINANCE

Journal of Accounting & Economics Pub Date : 2023-08-01 DOI:10.1016/j.jacceco.2022.101574

Nathan C. Goldman , Naim Bugra Ozel

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引用次数: 0

Abstract

We examine whether individual-level taxes affect executives' propensity to use nonpublic information in insider trades. We predict and find a positive relation between abnormal insider trading profitability and income tax rates. Using plausibly exogenous variation in state income tax rates, we estimate that the average executive uses insider trading profits to offset between 12.2% and 19.6% of the effect that income taxes have on their net compensation. We show that the sensitivity of these profits to tax rates varies predictably with the executives' compensation and shareholdings, firm monitoring effectiveness, and information asymmetry between insiders and outside investors. We also demonstrate a positive association between SEC enforcement actions and tax rates, suggesting that tax-rate-driven changes in abnormal trading profits expose insiders to legal risk. We find that insider trading volume exhibits little sensitivity to tax rates. Our findings show that income taxes affect executives’ tendency to use private information in their trades.

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高管薪酬、个人税率和内幕交易利润

我们研究了个人层面的税收是否会影响高管在内幕交易中使用非公开信息的倾向。我们预测并发现异常内幕交易盈利能力与所得税税率之间存在正相关关系。利用州所得税税率看似外生的变化，我们估计，普通高管利用内幕交易利润抵消了所得税对其净薪酬的12.2%至19.6%的影响。我们发现，这些利润对税率的敏感性随着高管的薪酬和持股、公司监控有效性以及内部和外部投资者之间的信息不对称而变化，这是可以预测的。我们还证明了美国证券交易委员会的执法行动与税率之间的正相关，这表明税率驱动的异常交易利润变化使内部人士面临法律风险。我们发现，内幕交易量对税率的敏感性很小。我们的研究结果表明，所得税会影响高管在交易中使用私人信息的倾向。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Accounting & Economics Multiple-

CiteScore

8.70

自引率

6.80%

发文量

期刊介绍： The Journal of Accounting and Economics encourages the application of economic theory to the explanation of accounting phenomena. It provides a forum for the publication of the highest quality manuscripts which employ economic analyses of accounting problems. A wide range of methodologies and topics are encouraged and covered: * The role of accounting within the firm; * The information content and role of accounting numbers in capital markets; * The role of accounting in financial contracts and in monitoring agency relationships; * The determination of accounting standards; * Government regulation of corporate disclosure and/or the Accounting profession; * The theory of the accounting firm.