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Publications
Publications
  • 2015
  • Working Paper
  • HBS Working Paper Series

Executives' Financial Preferences and Shareholder Tax Outcomes

By: Gerardo Pérez Cavazos and Andreya M. Perez-Silva
  • Format:Print
  • | Language:English
  • | Pages:46
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Abstract

We demonstrate that executives’ personal financial preferences impact both layers of shareholder taxes, corporate taxes and corporate payouts. We reconstruct executives’ insider equity portfolios to quantify their personal incentives and analyze stock sales that reveal their personal preferences to incorporate tax strategy in their financial decisions. We find that 2,281 executives strategically realize their built-in capital gains prior to the 2013 tax hikes to save nearly $741 million in personal taxes. These executives reduce their shareholders’ tax burdens in an economically meaningful way. Specifically, before the same 2013 tax hike they saved shareholders over $700 million in taxes by distributing $8 billion in special and accelerated dividends. In addition, on average, the presence of each tax-strategic executive further lowers shareholder taxes by lessening the firm’s long-run cash effective tax rate by 43 basis points.

Keywords

Executives; Capital Gain; Dividends; Effective Tax Rate; Tax Avoidance; Taxation; Management Teams; Business and Shareholder Relations

Citation

Pérez Cavazos, Gerardo, and Andreya M. Perez-Silva. "Executives' Financial Preferences and Shareholder Tax Outcomes." Harvard Business School Working Paper, No. 16-034, September 2015.
  • SSRN

More from the Authors

    • August 2022
    • Journal of Financial Economics

    When the Local Newspaper Leaves Town: The Effects of Local Newspaper Closures on Corporate Misconduct

    By: Jonas Heese, Gerardo Pérez Cavazos and Caspar David Peter
    • May 2022
    • Accounting Review

    Investment as the Opportunity Cost of Dividend Signaling

    By: Zach Kaplan and Gerardo Pérez Cavazos
    • December 2021
    • Journal of Accounting Research

    Cash-for-Information Whistleblower Programs: Effects on Whistleblowing and Consequences for Whistleblowers

    By: Aiyesha Dey, Jonas Heese and Gerardo Pérez Cavazos
More from the Authors
  • When the Local Newspaper Leaves Town: The Effects of Local Newspaper Closures on Corporate Misconduct By: Jonas Heese, Gerardo Pérez Cavazos and Caspar David Peter
  • Investment as the Opportunity Cost of Dividend Signaling By: Zach Kaplan and Gerardo Pérez Cavazos
  • Cash-for-Information Whistleblower Programs: Effects on Whistleblowing and Consequences for Whistleblowers By: Aiyesha Dey, Jonas Heese and Gerardo Pérez Cavazos
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