IDEAS home Printed from https://ideas.repec.org/a/mhr/finarc/urnsici0015-2218(201812)744_462svcfat_2.0.tx_2-g.html
   My bibliography  Save this article

Start-ups, Venture Capital Financing, and Tax Policy under Adverse Selection

Author

Listed:
  • Diego d'Andria

Abstract

We study a market for equity financing with private information about start-up projects, thus producing adverse selection. The novelty lies in assuming that the alternative investment option for entrepreneurs earns them an income that correlates with the probability of succeeding as an entrepreneur. The model thereby captures conditions typically met by innovative entrepreneurs in a venture-capital market. We derive the equilibrium conditions that are found to produce under- and overinvestment simultaneously for different types of projects. We then discuss possible policy interventions using taxes and subsidies linked to observables.

Suggested Citation

  • Diego d'Andria, 2018. "Start-ups, Venture Capital Financing, and Tax Policy under Adverse Selection," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 74(4), pages 462-480, December.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201812)74:4_462:svcfat_2.0.tx_2-g
    DOI: 10.1628/fa-2018-0018
    as

    Download full text from publisher

    File URL: https://www.mohrsiebeck.com/en/article/startups-venture-capital-financing-and-tax-policy-under-adverse-selection-101628fa-2018-0018
    Download Restriction: Fulltext access is included for subscribers to the printed version.
    File URL: https://libkey.io/10.1628/fa-2018-0018?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    entrepreneurship; start-ups; taxation; business subsidies; asymmetric information; adverse selection; equity finance; venture capital;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mhr:finarc:urn:sici:0015-2218(201812)74:4_462:svcfat_2.0.tx_2-g. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Wolpert (email available below). General contact details of provider: https://www.mohrsiebeck.com/fa .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.