The Influence Of Executive Compensation Incentive On Tax Planning

Tax planning has the function of saving the company’s tax cost and improving the after-tax profit.The company executive,as the trustee of shareholders,has certain decision-making power to the operation and management of the company.Due to asymmetric information,shareholders are not aware of the actual situation of the company.When a company carries out tax planning,the executive is unwilling to make tax planning for the company once he finds that the cost of his investment is greater than the amount of compensation he receives.Shareholders usually use monetary compensation incentives and equity incentives to hire executives.Whether the motivation of the two incentive methods to urge senior executives to carry out tax planning is the same,if they are different,how to formulate a reasonable salary structure to urge senior executives to carry out tax planning for the company?Different executives have different personality characteristics,different companies of their product market competition degree is also very different,these differences on the impact of executive compensation incentive on tax planning has a regulatory effect?Based on the above questions,the paper selects the data of Shanghai and Shenzhen A-share listed companies from 2013 to 2017 to study the impact of executive compensation incentive on tax planning,as well as the effect of executive’s personal characteristics and the degree of product market competition on the influence of executive compensation incentive on tax planning.This paper defines the concept of two kinds of executive compensation incentive methods(monetary compensation incentive and equity incentive),tax planning,executive personal characteristics,product market competition.According to the principal-agent theory,the incentive theory,the manager rent-seeking theory and the effective tax planning theory,this paper analyzes the influence of executive monetary compensation incentive on tax planning,the influence of executive equity incentive on tax planning and the difference between the two incentive methods on tax planning.At the same time,combined with the theory of Sociology and Gender Difference Psychology,this paper analyzes the effect of executive gender characteristics and financial background characteristics on the impact of executive compensation incentive on tax planning.Then based on the industry organization analysis to analyze the adjustment function of the degree of product market competition on the executive compensation incentive to the tax planning influence.The study found that:(1)Theincentive of executive currency compensation can significantly improve the tax planning of the company;(2)Executive equity incentive has significantly improved the degree of tax planning of the company,and the degree of influence is greater than the degree of influence of executive monetary compensation incentive on tax planning;(3)Female executives have a significant reverse adjustment effect on the impact of executive monetary compensation incentive on tax planning,and have a significant reverse adjustment effect on the impact of executive equity incentive on tax planning;(4)Financial background executives have a significant reverse adjustment effect on the impact of executive monetary compensation incentive on tax planning,and have a significant reverse adjustment effect on the impact of executive equity incentive on tax planning;(5)The degree of product market competition has a significant positive adjustment effect on the influence of executive monetary compensation incentive on tax planning,and has a significant positive adjustment effect on the influence of executive equity incentive on tax planning.According to the conclusion of the study,from the two aspects of personal characteristics of executives and product market competition,this paper puts forward the salary scheme to encourage executives to plan for the tax payment of the company.