Journal of Financial Economics Vol. 53 No. 3 1999
Capital gains tax rates and the cost of capital for small business: evidence from the IPO market
Abstract
We examine the issue prices of small initial public offerings around the 1993 tax law change that reduced the capital gains tax on qualified small business stock. We compare the actual issue price of new stock with a benchmark price that is not affected by the change in capital gains tax. We find that, after controlling for IPO underpricing, the issue prices of qualifying small business stock after the tax rate change are significantly higher than the issue prices before the change. A control sample of nonqualifying firms shows no significant difference in issue prices.
- DOI
- 10.1016/s0304-405x(99)00026-4
- Volume
- 53
- Issue
- 3
- Pages
- 385-408
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref