Investor Tax Breaks and Financing for Start-Ups: Evidence from China

İrem Güçeri, Xipei Hou, Jing Xing and Irem Guceri

No 11180, CESifo Working Paper Series from CESifo

Abstract: We examine how investor-level tax incentives affect financing for start-ups using the introduction of a generous tax deduction for qualified angel and VC investment in China as a quasi-natural experiment. We find that the tax incentive increases funding for eligible start-ups, with stronger responses from larger and more experienced investors. The tax incentive leads to substitution between eligible and non-eligible investments. There is no evidence that the tax incentive lowers investment quality. We further show that the investor-level tax incentive encourages firm entry into affected industries, especially in cities more exposed to venture capital funds.

Keywords: venture capital; angel investment; tax incentives; entrepreneurship (search for similar items in EconPapers)
JEL-codes: G24 G32 H25 L26 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-cna, nep-ent, nep-fdg, nep-pbe, nep-pub and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11180

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