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Heterogeneous tax sensitivity of firm-level investments

Peter Egger (), Katharina Erhardt () and Christian Keuschnigg

Journal of Economic Behavior & Organization, 2020, vol. 176, issue C, 512-538

Abstract: This paper introduces a stylized theoretical framework to identify five different firm types depending on their financial situation and their ownership structure. The model explains the heterogeneous tax sensitivity of firm-level investments. The empirical analysis uses a large firm database for 24 countries allowing for a quantification of the regime-specific investment responses to taxation and identifies the partly latent firm types using a threshold estimation approach. We find important differences in the tax sensitivity of investment across firm-types for dividend as well as for corporate taxation. The impact of corporate taxation is substantially higher for entrepreneurial firms than for managerial firms. In contrast, dividend taxation has a comparable negative effect for cash-constrained managerial firms and entrepreneurial firms but no significant impact on their unconstrained counterparts.

Keywords: Corporate tax; Personal taxes; Firm heterogeneity; Access to capital; Manager–shareholder conflicts (search for similar items in EconPapers)
JEL-codes: D22 G32 H25 L21 (search for similar items in EconPapers)
Date: 2020
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Related works:
Working Paper: Heterogeneous Tax Sensitivity of Firm-level Investments (2018) Downloads
Working Paper: Heterogeneous Tax Sensitivity of Firm-level Investments (2014) Downloads
Working Paper: Heterogeneous Tax Sensitivity of Firm-level Investments (2014) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:176:y:2020:i:c:p:512-538

DOI: 10.1016/j.jebo.2020.05.008

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