Investor Tax Breaks and Financing for Start-Ups: Evidence from China

76 Pages Posted: 3 Jul 2024

See all articles by Irem Güçeri

Irem Güçeri

University of Oxford

Xipei Hou

Shanghai Jiao Tong University (SJTU), Antai College of Economics and Management, Students

Jing Xing

Antai College of Economics & Management, Shanghai Jiao Tong University

Date Written: 2024

Abstract

We examine how investor-level tax incentives affect financing for start-ups using the introduction of a generous tax deduction for qualified angel and VC investment in China as a quasi-natural experiment. We find that the tax incentive increases funding for eligible start-ups, with stronger responses from larger and more experienced investors. The tax incentive leads to substitution between eligible and non-eligible investments. There is no evidence that the tax incentive lowers investment quality. We further show that the investor-level tax incentive encourages firm entry into affected industries, especially in cities more exposed to venture capital funds.

Keywords: venture capital, angel investment, tax incentives, entrepreneurship

JEL Classification: G240, G320, H250, L260

Suggested Citation

Güçeri, Irem and Hou, Xipei and Xing, Jing, Investor Tax Breaks and Financing for Start-Ups: Evidence from China (2024). CESifo Working Paper No. 11180, Available at SSRN: https://ssrn.com/abstract=4882437 or http://dx.doi.org/10.2139/ssrn.4882437

Irem Güçeri (Contact Author)

University of Oxford ( email )

Mansfield Road
Oxford, OX1 4AU
United Kingdom

Xipei Hou

Shanghai Jiao Tong University (SJTU), Antai College of Economics and Management, Students ( email )

No.535 Fahuazhen Road
Shanghai
China

Jing Xing

Antai College of Economics & Management, Shanghai Jiao Tong University ( email )

1954 Huashan Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200030
China
86 21 52301040 (Phone)

HOME PAGE: http://www.acem.sjtu.edu.cn/en/faculty/xingjing.html

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