Despite the growing use of subjective performance incentives used in executive bonuses, empirical evidence on their effectiveness remains inconclusive. This study explores three aspects of subjective metrics in bonus plan design: their prevalence, the goals they target, and their impact on managerial behavior and firm outcomes. First, I document 53.8 percent of CEO bonus plans include at least one subjective performance measure, and among these plans, an average of 38.9 percent of total bonus weight is allocated to these measures. Using machine learning, I show subjective metrics target incentives related to employees, firm culture, and executive performance. Second, using the Tax Cuts and Jobs Act as a quasi-exogenous shock to contract design, I find firms increase the number and weight of subjective metrics by 22.9 percent and 10.4 percent, respectively. Finally, I find the increasing prevalence of subjective performance measures positively influences CEO effort, corporate culture, and innovation. Data Availability: The data used in this study are from public sources and available upon request.

We investigate whether foreign tax holiday participation among US multinational companies is associated with offshoring US jobs and other domestic investment activities. We find that foreign tax holiday participation is associated with (1) an increase in offshoring US jobs and (2) a decrease in domestic investment, as proxied by changes in the number of employees, capital expenditures, and R&D activity. Furthermore, we find evidence suggesting that the association between targeted, temporary tax incentives provided by foreign tax holidays and firms' domestic activities is stronger among firms with a smaller foreign presence and is distinct from the impact of foreign statutory tax rate changes. Overall, the results of this study increase our understanding of the firm‐level consequences of foreign tax holiday participation, the influence of various tax incentive structures on the allocation of firm resources, and the potential consequences of international tax competition.

Amid growing globalization, many countries have offered tax incentives to attract corporate investment. Prior research studies the role such incentives play in firms' location and investment choices. However, we have limited evidence regarding the role that uncertainty about the intensity of future tax enforcement plays in those decisions. In 2013, the European Commission (E.C.) abruptly began investigating the tax-ruling practices of several countries in response to allegations that certain firms received preferential tax treatment (“state aid cases”). We use this setting to study the economic consequences of increased uncertainty about future tax enforcement. We find evidence consistent with significant reductions in U.S. multinational enterprises' subsidiary investments within, firm input purchases from, and aggregate investment of U.S. firms flowing to targeted state aid countries. Specifically, for U.S. multinational enterprises' subsidiary investments, we find fixed assets declined by 1.7 percent of total assets, or $7.6 million per subsidiary.