Arbeitspapier
Start-ups, Venture Capitalists, and the Capital Gains Tax
A model of start-up finance with double moral hazard is proposed. Entrepreneurs have ideas but lack own resources as well as commercial experience. Venture capitalists provide start-up finance and managerial support. Both types of agents thus jointly contribute to the firm's success, but neither type's effort is verifiable. We find that the market equilibrium is biased towards inefficiently low venture capital support. In this situation, the capital gains tax is particularly harmful. The introduction of a small tax impairs managerial advice and leads to first order welfare losses. Once the tax is in place, limitations on loss off-set may paradoxically contribute to higher quality of venture capital backed entrepreneurship and welfare.
- Language
-
Englisch
- Bibliographic citation
-
Series: CESifo Working Paper ; No. 742
- Classification
-
Wirtschaft
- Subject
-
venture capital
capital gains taxation
double moral hazard.
- Event
-
Geistige Schöpfung
- (who)
-
Keuschnigg, Christian
Nielsen, Søren Bo
- Event
-
Veröffentlichung
- (who)
-
Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
-
2002
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Keuschnigg, Christian
- Nielsen, Søren Bo
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2002
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Do tax loss restrictions distort venture capital funding of start-ups?
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How to support cleantech start-ups? Lessons from European venture-capital deals
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Entscheidungskriterien von Venture-Capitalists
Social Business Start-Ups und Venture Philanthropy : Praxisrelevanz der philanthropischen Förderung für Social Business Start-Ups
Capital gains taxation and funding for start-ups
Capital gains taxation and funding for start-ups
Venture capitalists as economic principals
Art collectors as venture capitalists
Art collectors as venture capitalists
Corporate Branding: vom Wert der Marke : eine empirische Untersuchung: Befragung von - Gründern - Venture capitalists und Finanzanalysten ; [wie Start-ups zu Markenpersönlichkeiten werden]
Do tax loss restrictions distort venture capital funding of start-ups?
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How to support cleantech start-ups? Lessons from European venture-capital deals