Capital gains taxation and funding for start-ups

• 成果类型: Article
• 署名作者: Edwards, Alexander; Todtenhaupt, Maximilian
• 署名单位: University of Toronto; Norwegian School of Economics (NHH)
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.06.009
• 发表日期: 2020
• 页码: 549-571
• 关键词: capital gains taxes; Start-ups; tax capitalization

摘要

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. (C) 2020 Elsevier B.V. All rights reserved.