Executives’ income tax burden, earnings management and stock reduction

Abstract

This paper selects companies that implemented equity incentives during 2011–2021 as a research sample, and delves into how executives avoid personal income tax burden and alleviate the pressure on tax-paying funds through earnings management and stock reductions. The results of the study show that as the amount of executives' true tax burden increases, the proportion of shares they reduce their holdings in the six months prior to the unlock date increases accordingly. In addition, the proportion of executives who reduced their holdings was significantly higher in the group with higher tax collection intensity than in the group with lower collection intensity. These findings are important for understanding the impact of executive tax behavior and tax collection policies.