In a sample of 251 Swedish IPOs, evidence is provided that employees, customers, suppliers, and others with non-arm length connections with the issuing firm and the investment bank are favored investors. The allocation suggests that underpricing serves as indirect compensation. The hypothesis is supported by the significant drop in average initial return from 41% to 8% around a regulatory tax change which reduced the incentive to favor employees of the issuing firm and of the investment bank. The paper concludes that the tax wedge between ordinary income and capital gains contributed to a portion of the underpricing before the regulatory change.

The relative prices of shares that differ only in their voting rights are modelled. In our model, voting rights become valuable when a control contest is decided through takeover bids for outside votes. The study shows how the value of the voting right depends on the initial ownership distribution, the share structure, and the ability of the incumbent manager versus a rival for control. Empirical support for the model is provided using Swedish stock market data.

Lottery bonds are Danish Treasury obligations which make coupon payments by lottery. Professional traders have a tax preference for the coupon lottery, while investors are tax-neutral and take the other side of the trade. Consistent with tax-based explanations of abnormal ex-day returns, we find that prices fall by more than the lottery mean. Surprisingly, we also find that the price drop over the lottery decreases with the lottery variance. This suggests that investors do not like the lottery. In fact, the Danish Treasury has been able to sell more lottery bonds only by offering above market interest rates. Journal of Economic Literature Classification Numbers: G12, G35, G63.

We provide market-based evidence that a capital loss that is realized in the beginning of the year is less valuable than a loss that is taken at the end of the year. A simple binomial tree model that captures the resolution of tax rate uncertainty closely mimics observed market prices. Tax rate uncertainty arises from not knowing until the end of the calendar year whether the investor will have realized sufficient capital gains to fully benefit from losses harvested early in the year. We conclude that tax rate uncertainty influences investor behavior.

Since World War II, direct stock ownership by households across the globe has largely been replaced by indirect stock ownership by financial institutions. We argue that tax and retirement policies are among the factors behind these changes. We develop empirical measures of two tax incentives of holding stocks inside tax-deferred plans, tax-free investment income and the smoothing benefit. Using long time-series from eight countries, we show that the fraction of household ownership decreases with these measures of the tax benefits. This finding contributes to policy debates on effective taxation and to financial economics research on the long-term effects of taxation on corporate finance and asset prices.

A worker can reduce tax liability by contributing to a private pension plan when marginal tax rates are high and withdraw pension benefits when marginal tax rates are low. We quantify the tax benefit of income smoothing through the private retirement system and find that it is negligible. This conclusion is important to households, investment advisers, tax policymakers, and scholars engaged in financial retirement planning.