Corporate finance and the governance implications of removing government support programs

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• 作者：Martin Jacob^a ; ^{martin.jacob@whu.edu" class="auth_mail" title="E-mail the corresponding author} ; Sofia Johan^b ; ^{sjohan@schulich.yorku.ca" class="auth_mail" title="E-mail the corresponding author} ; Denis Schweizer^c ; ^{Denis.Schweizer@concordia.ca" class="auth_mail" title="E-mail the corresponding author} ; Feng Zhan^d ; ^{fzhan@jcu.edu" class="auth_mail" title="E-mail the corresponding author}
• 关键词：Investment funds ; Labour-Sponsored Venture Capital Corporations (LSVCCs) ; Tax subsidies ; Value destruction
• 刊名：Journal of Banking & Finance
• 出版年：2016
• 出版时间：February 2016
• 年：2016
• 卷：63
• 期：Complete
• 页码：35-47
• 全文大小：459 K

文摘

Governments worldwide spend trillions of dollars on business support programs. This article examines the implications to investors of phasing out one of these subsidy programs. Our setting takes advantage of a unique quasi-natural experiment, where tax subsidies for Canadian Labour-Sponsored Venture Capital Corporations (LSVCCs) were phased out in one province but not in others. Using a difference-in-differences setting, we show that fund performance—unrelated to the tax credit—decreased substantially following the enactment of the phase-out. We further show empirically that LSVCC managers continued to charge venture capital-like management fees, despite the fact that their investment strategies become more similar to mutual funds. Our data strongly support the idea that investors in companies and/or funds that unexpectedly lose government support face significant financial costs.