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Journal of Financial Economics Vol. 111 No. 1 2014

Government policy and ownership of equity securities

Kristian Rydqvist1,2; Joshua D. Spizman3; Ilya A. Strebulaev4

1 Binghamton University · 2 Centre for Economic Policy Research · 3 Loyola Marymount University · 4 Stanford University

Abstract

Since World War II, direct stock ownership by households across the globe has largely been replaced by indirect stock ownership by financial institutions.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.

DOI
10.1016/j.jfineco.2013.09.001
Volume
111
Issue
1
Pages
70-85
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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