Tax Incentives on Equity and Firms' Cost of Capital: Evidence from the Quebec Stock Savings Plan

49 Pages Posted: 16 Feb 2005 Last revised: 25 Jan 2016

See all articles by Jean Bédard

Jean Bédard

Université Laval - École de comptabilité

Suzanne M. Paquette

Université Laval, École de comptabilité

Daniel Coulombe

Université Laval - Département des Sciences Comptables

Date Written: April 21, 2005

Abstract

We empirically investigate the impact of the QSSP tax incentive on the issue price of shares of initial public offerings of Quebec-based firms during 1982 to 2002. Consistent with expectations, we find that, after controlling for IPO underpricing, the underpricing of IPOs is significantly negatively associated with the QSSP deduction. However, our results suggest that although issuing corporations benefited from the QSSP program through higher issue prices, Quebec individual investors reaped a much larger proportion of the tax benefit than the corporations. Furthermore, contrary to expectations, our evidence indicates that the presence of non-QSSP eligible investors had no significant effect on the sharing of the tax benefit.

Keywords: Implicit taxes, Initial public offerings, Underpricing, Marginal investor, Tax incentives, Quebec Stock Savings Plan

JEL Classification: G18, G32, H22, H30, H32

Suggested Citation

Bédard, Jean and Paquette, Suzanne M. and Coulombe, Daniel, Tax Incentives on Equity and Firms' Cost of Capital: Evidence from the Quebec Stock Savings Plan (April 21, 2005). Contemporary Accounting Research, Vol. 24, No. 3, 2007, Available at SSRN: https://ssrn.com/abstract=667841 or http://dx.doi.org/10.2139/ssrn.667841

Jean Bédard

Université Laval - École de comptabilité ( email )

2325, rue de la Terrasse
Québec, Québec G1V 0A6
Canada
418-656-7055 (Phone)
418-656-2624 (Fax)

Suzanne M. Paquette (Contact Author)

Université Laval, École de comptabilité ( email )

2325, rue de la Terrasse
Universite Laval
Québec, Quebec G1V 0A6
Canada
418-656-2796 (Phone)

Daniel Coulombe

Université Laval - Département des Sciences Comptables ( email )

Ste-Foy, Quebec G1K 7P4
Canada
418-656-2827 (Phone)
418-656-2624 (Fax)

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