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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.

Suggested Citation

  • Achleitner, Ann-Kristin & Bock, Carolin & Watzinger, Martin, 2011. "The capital gains tax: A curse but also a blessing for venture capital investment," CEFS Working Paper Series 2011-04, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).
  • Handle: RePEc:zbw:cefswp:201104
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    References listed on IDEAS

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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) - Commission of Experts for Research and Innovation, Berlin, volume 127, number 2012e, April.

    More about this item

    Keywords

    capital gains tax; venture capital; investment;

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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