'Empire-Building,' Underinvestment and Capital Gain Taxation
University of Bridgeport Working Paper
Posted: 15 Jan 2010 Last revised: 8 Jul 2010
Date Written: January 10, 2009
This note provides an explanation for why tax rates on capital gains are usually lower than ordinary income tax rates based on manager's agency problem related to "empire-building" and the underinvestment problem.
Keywords: capital gains tax, moral hazard, underinvestment, empire-building
JEL Classification: D86, G35, H24, H32, J33
Suggested Citation: Suggested Citation