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Halperin & Sansing on Is the Effective Tax Rate an Effective Performance Measure?

Paul Caron

Ssrn_logo_41Robert Halperin (University of Illinois, College of Business) & Richard C. Sansing (Dartmouth, Tuck School of Business) have posted Is the Effective Tax Rate an Effective Performance Measure? on SSRN.  Here is the abstract:

This paper examines the properties of the effective tax rate (ETR) as a measure of managerial tax planning effectiveness using a principal-agent model. ETR is calculated as Tax Expense (computed pursuant to SFAS No. 109) divided by Income Before Taxes. The changes in ETR due to the agent’s actions are systematically different from the changes in the principal’s tax burden. These differences suggest that ETR is an ineffective measure of the agent’s performance.

About the Author

Paul Caron Avatar
Paul Caron
Paul Caron was named Duane and Kelly Roberts Dean of Pepperdine University School of Law on June 1, 2017. Dean Caron joined the Pepperdine faculty in 2013 after serving as the Dorothy and Leonard Straus Distinguished Visiting Professor of Law in the spring semesters of 2010 through 2013. He served as Associate Dean for Research and Faculty Development at Pepperdine in 2015-2017. Before coming to Pepperdine, he was Associate Dean of Faculty and Charles Hartsock Professor of Law at the University of Cincinnati College of Law.
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