How Taxes on Managers Affect Corporate Risk-Taking

Fiscal policy—and taxation in particular—is one of the most important tools that policymakers can use to influence the economy. While the effect of corporate taxes on managers’ corporate investment decisions has been extensively studied, little is known about the effect of managers’ personal taxes on their corporate investment decisions. In a recent study, we attempt to fill this gap by examining the relation between personal income taxes levied directly on senior managers, hereafter “managerial taxes,” and their corporate risk-taking. Given their unique position as primary decision-makers at the firm, understanding whether and how taxes on senior managers affect corporate decisions … Read more