The dark side effects of CEO general managerial skills on corporate overinvestment

Chen, Man; Liu, Si; Wang, Feng; Guo, Rui

doi:10.1007/s10490-023-09910-8

Asia Pac J Manag

2023

DOI: 10.1007/s10490-023-09910-8

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The dark side effects of CEO general managerial skills on corporate overinvestment

Man Chen,

Si Liu,

Feng Wang

et al.

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2024

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Cited by 2 publications

References 56 publications

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Corporate environmental information disclosure, managerial ownership and the cost of debt

Zheng,

Shen

2024

International Review of Economics & Finance

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Corporate environmental information disclosure, managerial ownership and the cost of debt

Zheng,

Shen

2024

International Review of Economics & Finance

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Managerial ability and tax avoidance adjustment toward the optimal level

Lee,

Jung,

Cho

2024

Spanish Journal of Finance and Accounting / Revista Española de

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The tax literature shows that income shifting within multinational companies collides with optimal incentivization of managers in subsidiaries. The different modes of income shifting have received different attention, however, and the incentive implications of internal debt shifting have not yet been investigated. We analyze the different impacts of tax-efficiently setting intercompany prices for the use of intangibles (royalties) and debt shifting on incentivization of affiliate managers. Different from most other studies, we focus on endogenous, unobservable managerial effort and the firm's optimal design of the (linear) compensation contract. For EBIT(DA) as performance measure, we find that internal debt shifting does not have a direct effect on management incentives, but has an ambiguous indirect impact via increased investment. In contrast, tax-motivated royalty payments have a clearly negative incentive effect that is fully offset, however, by an higher compensation rate. Hence, the adjustment of the compensation payment reveals the firm's aggressiveness in income shifting via intangibles. There is no confounding indirect effect from tax-motivated royalty payments because these payments do not affect investment.

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The dark side effects of CEO general managerial skills on corporate overinvestment

Cited by 2 publications

References 56 publications

Corporate environmental information disclosure, managerial ownership and the cost of debt

Corporate environmental information disclosure, managerial ownership and the cost of debt

Managerial ability and tax avoidance adjustment toward the optimal level

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