Theoretical and empirical research in corporate income tax and compensation contracts

2017 Fiscal Year Final Research Report

• Project/Area Number: 26380615
• Research Category: Grant-in-Aid for Scientific Research (C)
• Allocation Type: Multi-year Fund
• Section: 一般
• Research Field: Accounting
• Research Institution: Keio University
• Principal Investigator: MURAKAMI Yutaro 慶應義塾大学, 経営管理研究科(日吉), 准教授 (30434591)
• Project Period (FY): 2014-04-01 – 2018-03-31
• Keywords: 税務会計 / 契約理論 / 会計利益と課税所得の一致

Outline of Final Research Achievements

This research investigates how does a degree of book-tax conformity affect manager's compensation contracts. The pros and cons of requiring book-tax conformity have been discussed in many countries for more than half a decade.
In this research, we find that the book-tax conformity prevents the manager from engaging earnings management while it fails to provide an incentive to do tax planning. Therefore, whether the principal raises the bonus coefficient depends on the relative level of production and biasing costs and the tax rate. Our main findings are as follows. The bonus coefficient in the decoupling case is higher than that in the conformity case if the corporate tax rate is high, the biasing cost is relatively small compared to the production cost, and/or manager's　degree of risk aversion or cash flow volatility is sufficiently high. Further, principal's utility in the decoupling case is always higher than that in the conformity case.

Free Research Field

会計