Journal of Financial Economics is included on the NHH Bonus list and on the Financial Times Research Rank List, and it is also on level 4* in the ABS Academic Journal Guide.

Edwards, Alexander and Maximilian Todtenhaupt: Capital gains taxation and funding for start-ups, Journal of Financial Economics, Online 20.06.2020.

Abstract

We examine how capital gains taxes affect investment in private start-up (i.e., pre-IPO) firms. Using data on capital raised in individual funding rounds, we estimate the effect of the 2010 SBJA, which implemented a full exemption from federal capital gains tax on the sale of qualified shares.

Because of the resulting higher expected after-tax returns, we hypothesize and find evidence consistent with this capital gains tax reduction increasing the amount of investment in start-up firms per funding round by about 12%. The effect is stronger in start-up firms that are likely to have greater administrative capacity. We estimate that about one-third of the tax benefit is captured by investors.

• Share on Facebook
• Share on Twitter
• Share on LinkedIn
• Share by e-mail