Journal article
CEO Tax Lock-In and Share Pledging
The Accounting review
10/01/2026
DOI: 10.2308/TAR-2025-0006
Abstract
We study how CEOs’ personal tax incentives shape their share pledging decisions and firms’ restrictions on the practice. Pledging shares entails using company stock as collateral for personal loans, enabling executives to obtain liquidity without making a taxable sale of appreciated shares. Using pledging data from 2006 to 2024, we find a robust positive relation between CEOs’ unrealized capital gains tax liabilities, or tax burdens, and share pledging. This relation is weaker when interest rates are high, consistent with CEOs’ trading off tax benefits against borrowing costs. After Institutional Shareholder Services discouraged share pledging in 2012, firms with high-tax-burden CEOs were slower to adopt antipledging policies and, when they did adopt, chose less restrictive policies. Firms that adopted strong antipledging policies subsequently increased CEO cash pay and stock awards. Our evidence suggests that share pledging helps executives manage personal tax lock-in and that firms consider this benefit when restricting pledging. Data Availability: Data are available from the public and subscription sources identified in the text, subject to applicable data-use restrictions. JEL Classifications: G30; H24; J33; M52.
Details
- Title: Subtitle
- CEO Tax Lock-In and Share Pledging
- Creators
- Jonathan Underwood - Texas State UniversityBenjamin P. Yost - Boston College
- Resource Type
- Journal article
- Publication Details
- The Accounting review
- DOI
- 10.2308/TAR-2025-0006
- ISSN
- 0001-4826
- eISSN
- 1558-7967
- Publisher
- American Accounting Association
- Grant note
- Carroll School of Management at Boston College Tippie College of Business at The University of Iowa McCoy College of Business at Texas State University
We thank Martin Jacob (editor) and two anonymous reviewers for guidance and feedback that greatly improved the paper. We have also benefited from helpful comments and suggestions from Mary Ellen Carter, Robert Hills (discussant), Amy Hutton, Jaron Wilde, Ryan Wilson, Will Yoder, Yuan Zou, and conference and workshop participants at the 2024 American Taxation Association Midyear Meeting and The University of Iowa. We gratefully acknowledge financial support from the Carroll School of Management at Boston College, the Tippie College of Business at The University of Iowa, and the McCoy College of Business at Texas State University.
- Language
- English
- Electronic publication date
- 10/01/2026
- Academic Unit
- Accounting
- Record Identifier
- 9985241791602771
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