Employee Stock Options, Corporate Taxes and Debt Policy
AbstractWe find that employee stock option deductions lead to large aggregate tax savings for Nasdaq 100 and S&P 100 firms and also affect corporate marginal tax rates. For Nasdaq firms, the median marginal tax rate is 31 percent when option deductions are ignored but falls to 5 percent when one accounts for the deductions. For S&P firms, however, option deductions do not affect marginal tax rates to a large degree. In the spirit of DeAngelo and Masulis (1980), option deductions are important nondebt tax shields that can affect corporate policies. We find evidence consistent with option deductions substituting for interest deductions in corporate capital structure decisions. This evidence explains in part why some firms appear to be underlevered.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9289.
Date of creation: Oct 2002
Date of revision:
Publication status: published as Graham, John R., Mark H. Lang and Douglas A. Shackelford. "Employee Stock Options, Corporate Taxes, And Debt Policy," Journal of Finance, 2004, v59(4,Aug), 1585-1618.
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Other versions of this item:
- John R. Graham & Mark H. Lang & Douglas A. Shackelford, 2004. "Employee Stock Options, Corporate Taxes, and Debt Policy," Journal of Finance, American Finance Association, vol. 59(4), pages 1585-1618, 08.
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-10-23 (All new papers)
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