Tax and Corporate Governance: The Influence of Tax on Managerial Agency Costs
Document Type
Book Chapter
Publication Date
5-2025
Abstract
This chapter examines how tax influences managerial agency costs in the US, shaping executive compensation, corporate decision-making, and shareholder oversight. It argues that tax is a flawed tool for reducing agency costs because its main purpose is to generate revenue, not to solve corporate governance problems. While some tax policies, such as discouraging executives from hedging stock options and encouraging leverage, inadvertently mitigate agency costs, others, like tax-driven justifications for retaining earnings or resisting acquisitions, worsen them. The chapter also explains how tax authorities focus on revenue collection rather than governance concerns and often implement policies with unintended and counterproductive consequences. Finally, it concludes that while policymakers should adjust tax rules carefully to avoid exacerbating agency costs, corporate governance experts must account for these tax effects when crafting legal and regulatory responses.
Disciplines
Business Organizations Law | Law | Law and Politics
Recommended Citation
David M. Schizer,
Tax and Corporate Governance: The Influence of Tax on Managerial Agency Costs,
The Oxford Handbook of Corporate Law and Governance, Jeffrey N. Gordon & Wolf-Georg Ringe (Eds.), Oxford University Press
(2025).
Available at:
https://scholarship.law.columbia.edu/faculty_scholarship/4777
Comments
This book chapter was initially published online May 22, 2025.