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The effect of Germany's repeal of the corporate capital gains tax: Evidence from the disposal of corporate minority holdings

Silke Rünger

No 126, arqus Discussion Papers in Quantitative Tax Research from arqus - Arbeitskreis Quantitative Steuerlehre

Abstract: Germany's repeal of the corporate capital gains tax for the disposal of domestic holdings was expected to substantially change the system of corporate network holdings and corporate control. Based on a general divestiture model, we show that the probability of a disposal increased after the tax reform. Using a unique data set with no need to proxy for the disposal of corporate equity holdings, we analyze 354 German minority holdings over the period 1999-2007. We find significant higher disposal rates for 2002, the year the reform became effective. Further analyses reveal that this effect can be attributed to non-listed parent companies outside the financial sector, i.e. companies mainly ignored in prior research. Thus, our results also help to explain why prior research using event studies failed to detect a widespread market reaction of German firms.

Keywords: corporate capital gains; lock-in effect; corporate equity holdings; Germany (search for similar items in EconPapers)
JEL-codes: G11 G34 H25 H32 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-acc and nep-eur
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