Changes in CEO Compensation after the Tax Cuts & Jobs Act and the Impact of Corporate Governance: Initial Evidence

2019 ◽  
Author(s):  
LeAnn Luna ◽  
Kathleen Schuchard ◽  
Danielle Stanley
Keyword(s):  
Corporate Governance ◽  
Ceo Compensation ◽  
Jobs Act ◽  
The Impact ◽  
Tax Cuts

scholarly journals Measuring the Effects of Corporate Tax Cuts

2018 ◽  
Vol 32 (4) ◽  
pp. 97-120 ◽  
Author(s):  
Alan J. Auerbach
Keyword(s):  
Multinational Corporations ◽  
Income Tax ◽  
Capital Investment ◽  
Corporate Income Tax ◽  
Tax Law ◽  
Corporate Tax ◽  
The Law ◽  
Jobs Act ◽  
The Impact ◽  
Tax Cuts

On December 22, 2017, President Donald Trump signed the Tax Cuts and Jobs Act (TCJA), the most sweeping revision of US tax law since the Tax Reform Act of 1986. The law introduced many significant changes. However, perhaps none was as important as the changes in the treatment of traditional “C” corporations—those corporations subject to a separate corporate income tax. Beginning in 2018, the federal corporate tax rate fell from 35 percent to 21 percent, some investment qualified for immediate deduction as an expense, and multinational corporations faced a substantially modified treatment of their activities. This paper seeks to evaluate the impact of the Tax Cuts and Jobs Act to understand its effects on resource allocation and distribution. It compares US corporate tax rates to other countries before the 2017 tax law, and describes ways in which the US corporate sector has evolved that are especially relevant to tax policy. The discussion then turns the main changes of the Tax Cuts and Jobs Act of 2017 for the corporate income tax. A range of estimates suggests that the law is likely to contribute to increased US capital investment and, through that, an increase in US wages. The magnitude of these increases is extremely difficult to predict. Indeed, the public debate about the benefits of the new corporate tax provisions enacted (and the alternatives not adopted) has highlighted the limitations of standard approaches in distributional analysis to assigning corporate tax burdens.

scholarly journals (Un)intended Consequences? The Impact of the 2017 Tax Cuts and Jobs Act on Shareholder Wealth

2019 ◽  
Author(s):  
Ivalina Kalcheva ◽  
James Plecnik ◽  
Hai Tran ◽  
Jason Turkiela
Keyword(s):  
Shareholder Wealth ◽  
Jobs Act ◽  
The Impact ◽  
Tax Cuts

scholarly journals The Impact of the Tax Cuts and Jobs Act of 2017 on the US Government Debt

2019 ◽  
Vol 7 (4) ◽  
pp. 01-09
Author(s):  
Min Xu ◽  
Suk Kim ◽  
Jeanne David
Keyword(s):  
Government Debt ◽  
Us History ◽  
The Great Recession ◽  
Tax Relief ◽  
The Us ◽  
Us Government ◽  
Federal Debt ◽  
Jobs Act ◽  
The Impact ◽  
Tax Cuts

There have been three major tax cuts in the modern US history: 1) the Tax Cuts and Jobs Act of 2017; 2) the Economic Growth and Tax Relief Reconciliation Act of 2001; and 3) the Economic Recovery Act of 1981. Each of the first two major tax cuts had increased the federal debt. Just about everybody agrees that US federal debt is on an unsustainable path. Can we afford another major tax cut without trigging a major economic disaster such as the Great Recession of 2007-2009? This article discusses an overview of this new law, the impact of the first two major tax cuts on the federal debt, the impact of the Tax Cuts and Job Acts on the US government debt, and its consequences.

The impact of corporate governance on the relationship between earnings management and CEO compensation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Oheneba Assenso-Okofo ◽  
Muhammad Jahangir Ali ◽  
Kamran Ahmed
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Ceo Compensation ◽  
Empirical Support ◽  
Vital Role ◽  
Governance System ◽  
Content Type ◽  
Governance Practices ◽  
The Impact ◽  
The Relationship

PurposeThe study examines whether corporate governance moderates the relationship between CEO compensation and earnings management.Design/methodology/approachThe study uses 1,800 firm-year observations from 2005 to 2010 and employ multiple regression analyses and other sensitivity tests.FindingsThe study finds a positive relationship between CEO compensation and earnings management. The study’s results also suggest that CEO bonus compensation increases in relation to earnings management and therefore the study infers that managers may become involved in earnings management to increase their compensation. However, the study finds that the relationship is moderated by a strong corporate governance system which reduces the impact of earnings management on CEO compensation.Research limitations/implicationsThe study is conducted in a specific context, and therefore it may be subject to a set of limitations. The study emphasises exclusively on whether executives manage earnings to increase their compensation. The study does not consider the issue of several other and potentially contradictory motivations here.Practical implicationsThe study’s findings highlight potential implications and offer useful propositions for stakeholders, particularly accounting and corporate governance regulators, to consider. The findings offer a basis for the accounting professions to further discuss and improve accounting standards to provide adequate regulations and monitoring to decrease managerial opportunistic behaviours in earnings manipulations. The findings also emphasise the need for appropriately designed CEO compensation packages in such a manner that improves the manager–shareholder alignment and reduces the information asymmetry problem. The results signify that corporate governance plays a vital role in mitigating the relationship between CEO compensation and earnings management.Originality/valueThis study adds to the existing literature by documenting empirical support on the link between earnings management and CEO compensation against a backdrop of high demand for strong corporate governance practices.

scholarly journals (Un)intended consequences? The impact of the 2017 tax cuts and jobs act on shareholder wealth

2020 ◽  
Vol 118 ◽  
pp. 105860 ◽  
Author(s):  
Ivalina Kalcheva ◽  
James M. Plečnik ◽  
Hai Tran ◽  
Jason Turkiela
Keyword(s):  
Shareholder Wealth ◽  
Jobs Act ◽  
The Impact ◽  
Tax Cuts

scholarly journals Executive compensation and corporate performance: Evidence from Jordanian commercial banks

2018 ◽  
Vol 14 (2) ◽  
pp. 38-44 ◽  
Author(s):  
Majd Iskandrani ◽  
Hadeel Yaseen ◽  
Asma’a Al-Amarneh
Keyword(s):  
Corporate Governance ◽  
Executive Compensation ◽  
Commercial Banks ◽  
Ceo Compensation ◽  
Corporate Performance ◽  
Stock Exchange ◽  
Emerging Market ◽  
Primary Data ◽  
The Impact ◽  
The Relationship

The wave of the recent financial crisis has reawakened interest in corporate governance as well as the relationship between executive compensation and corporate performance. Notably, corporate governance has been presented as a mechanism to absorb fiscal crisis faced in emerging economies. The principal aim of this study is to investigate the relationship between CEO compensation and corporate performance among commercial banks operating in a small emerging market, namely Jordan. Primary data were collected for a sample of 13 Jordanian commercial banks listed at Amman Stock Exchange (ASE) during the period of 2010 -2016. The findings of this paper suggest that corporate performance measured by return on equity (ROE) and return on assets (ROA) has no influence on CEO compensation. Furthermore, this paper examines the impact of a firm’s size on the relationship between CEO compensation and corporate performance. The results reveal a significant relationship between executive compensation and firm’s performance among the smaller sample firms.

scholarly journals The Impact Of Corporate Governance And The Sarbanes-Oxley Act On CEO Compensation

2012 ◽  
Vol 28 (3) ◽  
pp. 463 ◽  
Author(s):  
Mahmoud M. Nourayi ◽  
Lawrence Kalbers ◽  
Frank P. Daroca
Keyword(s):  
Corporate Governance ◽  
Ceo Compensation ◽  
Outside Directors ◽  
Economic Determinants ◽  
Multiple Observations ◽  
Sarbanes Oxley ◽  
Corporate Governance Mechanisms ◽  
Ceo Age ◽  
Regulatory Controls ◽  
The Impact

This paper examines the effects of corporate governance on CEO compensation in light of regulatory controls introduced by the Sarbanes-Oxley Act of 2002 (SOX). The influence of economic and corporate governance variables on incentive-based CEO compensation are considered, using cross-section time-series panel data that includes multiple observations for the years 1999 to 2005. As expected, sales, firm performance (returns), and CEO age were found to positively affect the incentive components of CEO compensation. CEO duality, board size, and the percentage of outside directors had a significant influence on CEO compensation in the pre-SOX, but not post-SOX, period. The influences of these three variables in the pre-SOX period were not in the expected directions. Stratification of our sample into two groups by size reveals similarities and differences between smaller and larger firms. For both groups, economic determinants are more dominant than corporate governance variables as determinants of incentive-based CEO compensation. We find differences in the pattern and significance of variables between the smaller and larger firms, particularly for corporate governance variables, pre- and post-SOX. These results suggest that the effectiveness of corporate governance mechanisms may vary by size of company.

scholarly journals Corporate governance, analyst following and firm value

2014 ◽  
Vol 14 (4) ◽  
pp. 453-466 ◽  
Author(s):  
Sulaiman Mouselli ◽  
Khaled Hussainey
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Ceo Compensation ◽  
Stock Exchange ◽  
Financial Analysts ◽  
Chief Executive ◽  
Analyst Following ◽  
Content Type ◽  
Large Sample ◽  
The Impact

Purpose – The purpose of this paper is to examine the impact of a firm’s corporate governance (CG) mechanisms on the number of financial analysts following UK firms. The potential effect of the number of analysts following firms in the UK on the association between CG mechanisms and firm value was also examined. Design/methodology/approach – Multiple regression models were used to examine the association between CG, analyst coverage and firm value for a large sample of UK firms listed in London Stock Exchange with financial year ends between January 2003 and December 2008. Findings – It was found that the aggregate level of CG quality is positively associated with the number of analysts following UK firms. In addition, the compensation score is the main component that affects the number of analysts following UK firms. The results suggest that financial analysts are particularly concerned with how much compensation executives and directors receive. This is consistent with Jensen and Meckling (1976) who argue that chief executive officer (CEO) compensation can be used as effective mechanisms for mitigating agency costs. Hence, higher levels of CEO compensation attract more financial analysts to follow the firm. Surprisingly, when the joint effect of both CG quality and the number of analysts following on firm value was examined, no significant effect was found for both variables on firm value. Originality/value – This paper contributes to prior research by providing the first empirical evidence on the impact of disaggregated levels of CG on analyst following and firm value for a large sample of UK firms.

scholarly journals The Effect of the Tax Cuts and Jobs Act on the Choice between Traditional and Roth IRAs

2020 ◽  
Vol 27 (2) ◽  
pp. 30
Author(s):  
Brian Nichols ◽  
Chioma Nwogu
Keyword(s):  
Income Tax ◽  
Tax Rates ◽  
Rates Of Return ◽  
Tax Rate ◽  
Tax Benefits ◽  
Roth Ira ◽  
Tax Savings ◽  
Jobs Act ◽  
The Impact ◽  
Tax Cuts

This paper analyzes the impact of the tax cuts and jobs act on the income taxeffectiveness of the Roth IRA versus the traditional IRA for investors who maximizetheir contributions prior to retirement. Since the tax cuts and jobs act reduced marginalincome tax rates, the tax benefits gained from a traditional IRA decrease compared toa Roth IRA. Based on set investment parameters, an investor makes monthly paymentsto the IRAs for a specific period and the tax savings obtained from the traditional IRAare reinvested into a separate taxable account. The after-tax accumulation of wealth ineach account is calculated to determine which IRA produces the largest available aftertax withdrawals after retirement. A break-even analysis is also constructed to determinethe marginal income tax rate and investment return that makes an investor indifferentbetween the two IRAs. The results illustrate that the decision to invest in a traditionalIRA versus a Roth IRA depends on both the rates of return and whether the marginalincome tax rate is the same or different during the contribution and withdrawal periods.

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