Asymmetric Information, Corporate Myopia and Implications for Capital Gain Tax Rates

Thomas Chemmanur and S. Abraham Ravid

New York University, Leonard N. Stern School Finance Department Working Paper Seires from New York University, Leonard N. Stern School of Business-

Abstract: We develop a model of corporate myopia in which the interaction between asymmetric information and short-term trading by the firm's equity holders induces firm managers to undertake a short-term projects rather than long-term projects, which are intrinsically more valuable. In this setting, we analyze the impact on a reduction in the capital gains tax rate on project selection. We show that a capital gains tax cut for investors who hold equity in the firm

Date: 1997-08
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Persistent link: https://EconPapers.repec.org/RePEc:fth:nystfi:98-018

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