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Heterogeneous Tax Sensitivity of Firm-level Investments

Listed author(s):
  • Egger, Peter

    (ETH Zuerich)

  • Erhardt, Katharina

    (ETH Zuerich)

  • Keuschnigg, Christian

    (Institute for Advanced Studies, Vienna and University of St. Gallen)

Firms are heterogeneous in size, productivity, ownership concentration, governance, financial structure and other dimensions. This paper introduces a stylized theoretical framework to account for such differences and to explain the heterogeneous tax sensitivity of firm-level investments across firm types. We econometrically test the theoretical predictions, taking account of selection of firms into different regimes. We find important differences in the tax sensitivity of investment of small entrepreneurial and larger managerial firms in different financial regimes that are largely in line with theoretical results.

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File URL: http://www.ihs.ac.at/publications/eco/es-306.pdf
File Function: First version, 2014
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Paper provided by Institute for Advanced Studies in its series Economics Series with number 306.

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Length: 45 pages
Date of creation: Sep 2014
Handle: RePEc:ihs:ihsesp:306
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