'Empire-Building', Underinvestment and Capital Gain Taxation
Journal of Current Issues in Finance, Business and Economics, Vol. 2, No. 4, 2010
Posted: 15 Jan 2010 Last revised: 31 Aug 2010
Date Written: July 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