Prof. Alexander Edwards (University of Toronto)

Programm

Datum: 06. November 2018

Zeit: 17.00 - 18.30 Uhr

Ort: Schackstr. 4, Raum 314

Titel: Capital Gains Taxation and Funding for Start-Ups

Abstract

We examine how capital gains taxes affect investment in start-up (i.e., pre-IPO) firms. Using data on capital raised by start-up firms in individual funding rounds, we estimate the effect of the SBJA of 2010, which implemented a full exemption from federal capital gains tax on the sale of qualified shares. Because of higher expected after-tax returns (lower future capital gains taxes), 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%. We also provide evidence that this effect is concentrated in start-up firms that are likely to be more financially sophisticated.