- Consulting Editors
- Finance of New industries
- The Returns to Entrepreneurship
- Risk Attitudes and Private Business Equity
- New Firm Financing and Performance
- New Perspectives On Entrepreneurial Capital Structure
- The Capital Structure of Family Firms
- Influence of Internal Factors on the Use of Equity-and Mezzanine-Based Financing in Family Firms
- Planning For Entrepreneurial Finance And Capital: A Critical Review Of The Importance Of Teaching Business Planning
- Funding Gaps
- Availability of Credit to Small Firms Young and Old: Evidence from the Surveys of Small Business Finances
- Asymmetric Information, Credit Market Condition, and Entrepreneurial Finance
- Alternative Types Of Entrepreneurial Finance
- Angel Investors and Their Investments
- Firm Growth, Schumpeterian Entrepreneurship, and Venture Capital
- Why Do Firms Go Public?
- Valuation Of IPOs
- Trade Credit and Its Role in Entrepreneurial Finance
- Factoring and Invoice Financing
- Project Finance
- Hedge Fund Asset-Based Lending
- Business Taxation, Corporate Finance, and Economic Performance
- Financial Capital among Minority-Owned Businesses
- Financing Women-Owned Firms: A Review Of Recent Literature
- International Differences In Entrepreneurial Finance
- Entrepreneurial Finance in Weak Institutional Environments
- Microfinance for Entrepreneurs
- The Past and Future of Innovations in Microfinance
- Index of Names
Abstract and Keywords
This article offers an overview of how different company decisions are affected by various tax policy instruments when some firms are financially constrained due to agency problems between inside and outside investors. To organize the discussion, the article presents a simple theoretical model of constrained and unconstrained firms with endogenous organizational choice. When the managerial effort of entrepreneurs is not observable, a high success probability of the firm is guaranteed only if insiders keep a large enough financial stake in the firm. Accordingly the company's income that is pledgeable as a repayment to external investors is reduced and limits the amount of external funding that the firm can obtain. This framework of financially constrained firms leads to predictions for the effects of taxes on investment and external financing that are entirely different from the traditional neoclassical model.
Christian Keuschnigg is professor of public economics at the University of St. Gallen and an editor of the European Economic Review. He has published widely on public policy toward entrepreneurial finance and venture capital, among other related topics, in leading journals that include, but are not limited to, the Journal of Public Economics and Oxford Economic Papers.
Evelyn Ribi held a post-doctoral postion at the University of St. Gallen. She graduated from the University of St. Gallen with a PhD in economics. In her research, she concentrates on public finance and capital and labor market frictions.
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