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The Capital Gains Tax: A Curse but also a Blessing For Venture Capital Investment

Center for Entrepreneurial and Financial Studies Working Paper No. 2011-04

54 Pages Posted: 7 Oct 2011 Last revised: 22 Oct 2013

Ann‐Kristin Achleitner

Technische Universität München - Center for Entrepreneurial and Financial Studies

Carolin Bock

Technische Universität Darmstadt

Martin Watzinger

Ludwig Maximilian University of Munich

Date Written: October 6, 2011

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.

Keywords: Capital Gains Tax, Venture Capital, Investment

JEL Classification: G24, H25, H32

Suggested Citation

Achleitner, Ann‐Kristin and Bock, Carolin and Watzinger, Martin, The Capital Gains Tax: A Curse but also a Blessing For Venture Capital Investment (October 6, 2011). Center for Entrepreneurial and Financial Studies Working Paper No. 2011-04. Available at SSRN: https://ssrn.com/abstract=1939844 or http://dx.doi.org/10.2139/ssrn.1939844

Ann-Kristin Achleitner

Technische Universität München - Center for Entrepreneurial and Financial Studies ( email )

Arcisstr. 21
Munich, D-80290
Germany
+49 89 289 25181 (Phone)

Carolin Bock (Contact Author)

Technische Universität Darmstadt ( email )

Hochschulstr. 1
Darmstadt, 64289
Germany

HOME PAGE: http://www.ent.tu-darmstadt.de

Martin Watzinger

Ludwig Maximilian University of Munich ( email )

Geschwister-Scholl-Platz 1
Munich, Bavaria 80539
Germany

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