The Effect of Succession Taxes on Family Firm Investment: Evidence from a Natural Experiment

Margarita Tsoutsoura

Journal of Finance, 2015, vol. 70, issue 2, 649-688

Abstract: type="main">

This paper provides causal evidence on the impact of succession taxes on firm investment decisions and transfer of control. Using a 2002 policy change in Greece that substantially reduced the tax on intrafamily transfers of businesses, I show that succession taxes lead to a more than 40% decline in investment around family successions, slow sales growth, and a depletion of cash reserves. Furthermore, succession taxes strongly affect the decision to sell or retain the firm within the family. I conclude by discussing implications of my findings for firms in the United States and Europe.

Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:70:y:2015:i:2:p:649-688

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