Investment effects of capital gains taxation under simultaneous investment and abandonment flexibility

摘要: The influence of capital gains taxes on investment decisions is a central issue accounting and public finance research. However, the implications investors' willingness to invest in irreversible projects with entry exit flexibility have not yet been focal issue. As result, effects taxing interdependencies divestment be identified, especially under timing flexibility. This paper closes this gap by simultaneously analyzing abandonment for risky uncertain cash flows differential tax rates ordinary income gains. We investigate whether affect immediate delayed asymmetrically. Furthermore, we impact taxation optimal decision. Performing extensive numerical simulations find that varying liquidation proceeds affects decision or postpone Higher flow volatility favors investment. introduction tends harmful Moreover, show may induce paradox Depending pre-tax parameter setting future value even increase absolute terms increasing rates. For sufficiently high favor continuation project. mainly induces other, but necessarily less arbitrary distortions than exempting