DP4097 Taxation and Venture Capital-Backed Entrepreneurship
|Author(s):||Christian Keuschnigg, Soren Bo Nielsen|
|Publication Date:||October 2003|
|Keyword(s):||double moral hazard, entrepreneurship, taxes, venture capital|
|JEL(s):||D82, G24, H24, H25|
|Programme Areas:||Public Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=4097|
In recent years, venture capital has increasingly become a factor in the financing of new firms. We examine how the value of mature firms determines the incentives of entrepreneurs to start up new firms and of venture capitalists to finance and advise them. We examine how capital gains taxes as well as subsidies to start-up costs of new firms affect venture capital-backed entrepreneurship. We also argue that dividend and capital gains taxes on mature firms have important consequences for start-up firms as well.