The Effect of Succession Taxes on Family Firm Investment: Evidence From a Natural Experiment

This paper provides causal evidence on the impact of succession taxes on firm investment decisions and transfer of control. Using a 2002 policy change in Greece that substantially reduced the tax on intrafamily transfers of businesses, I show that succession taxes lead to a more than 40% decline in investment around family successions, slow sales growth, and a depletion of cash reserves. Furthermore, succession taxes strongly affect the decision to sell or retain the firm within the family. I conclude by discussing implications of my findings for firms in the United States and Europe.

01. April 2015

Authors Margarita Tsoutsoura

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Professor Margarita Tsoutsoura, PhD

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