Effect of personal taxes on managers’ decisions to sell their stock

Jin, Li and Kothari, S.P. (2008) Effect of personal taxes on managers’ decisions to sell their stock. Journal of Accounting and Economics, 46 (1). pp. 23-46.


We examine the effect of personal taxes on CEOs’ decisions to sell their equity, controlling for diversification, managerial overconfidence, and other determinants. While CEOs frequently sell large amounts of their unrestricted firm equity, the tax burden associated with the sale significantly deters them from selling equity even after controlling for other determinants like diversification. We also find that both taxable institutional investors and CEOs respond to taxes in their selling of equity, although CEOs appear to be less tax-sensitive. Our findings underscore the importance of taxes in corporate and managerial decisions and they have implications for executive compensation policies.

Item Type: Article
Keywords: Executive compensation; Taxation; Overconfidence; Behavioral finance; Institutional investors; finance
Subject(s): Finance
Date Deposited: 20 Mar 2013 11:31
Last Modified: 27 Feb 2017 14:01
Funders: N/A
URI: http://eureka.sbs.ox.ac.uk/id/eprint/4497

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