Employee stock options, corporate taxes, and debt policy

Published

Journal Article (Review)

We 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, including the effect of options reduces the estimated median marginal tax rate from 31% to 5%. For S&P firms, in contrast, option deductions do not affect marginal tax rates to a large degree. Our evidence suggests that option deductions are important nondebt tax shields and that option deductions substitute for interest deductions in corporate capital structure decisions, explaining in part why some firms use so little debt.

Full Text

Duke Authors

Cited Authors

  • Graham, JR; Lang, MH; Shackelford, DA

Published Date

  • August 1, 2004

Published In

Volume / Issue

  • 59 / 4

Start / End Page

  • 1585 - 1618

International Standard Serial Number (ISSN)

  • 0022-1082

Digital Object Identifier (DOI)

  • 10.1111/j.1540-6261.2004.00673.x

Citation Source

  • Scopus