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The capital gains tax: A curse but also a blessing for venture capital investment

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  • Achleitner, Ann-Kristin
  • Bock, Carolin
  • Watzinger, Martin

Abstract

This article documents a statistical association between the number and success of venture capital investments and the capital gains tax rate. To do this, we analyze investment data and taxes of 32 countries from 2000 to 2010. In our data, higher capital gains tax rates are associated with fewer firms financed and a lower probability for ventures receiving follow-up funding. However, if the first investment is received when taxes are high, the probability of a firm eventually going public or being acquired increases. We conclude that high tax rates are associated with fewer, but on average more successful companies. --

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Bibliographic Info

Paper provided by Center for Entrepreneurial and Financial Studies (CEFS), Technische Universität München in its series CEFS Working Paper Series with number 2011-04.

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Date of creation: 2011
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Handle: RePEc:zbw:cefswp:201104

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Keywords: capital gains tax; venture capital; investment;

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  1. Da Rin, Marco & Nicodano, Giovanna & Sembenelli, Alessandro, 2006. "Public policy and the creation of active venture capital markets," Journal of Public Economics, Elsevier, Elsevier, vol. 90(8-9), pages 1699-1723, September.
  2. Paul Gompers & Anna Kovner & Josh Lerner & David Scharfstein, 2005. "Venture Capital Investment Cycles: The Impact of Public Markets," NBER Working Papers 11385, National Bureau of Economic Research, Inc.
  3. Ralf Becker & Thomas Hellmann, 2003. "The Genesis of Venture Capital - Lessons from the German Experience," CESifo Working Paper Series 883, CESifo Group Munich.
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Cited by:
  1. Commission of Experts for Research and Innovation (EFI), Berlin (ed.), 2012. "Research, innovation and technological performance in Germany - EFI Report 2012," Research, innovation and technological performance in Germany: Report, Expertenkommission Forschung und Innovation (EFI), volume 127, number 2012e, February.

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