The Wealth Tax’ Impact on Stock Exchange Listings : A comparative case study of wealth tax abolition’s effect on stock exchange listings through the synthetic control method

Abstract

The valuation basis for the wealth tax generally differs between listed and non-listed companies, where listed companies are valued at market value and non-listed companies are valued at book value. We analyze the 2007 wealth tax abolishment in Sweden. We find that the wealth tax abolishment in Sweden led to a persistent increase in the number of listed companies. Through the synthetic control method, we estimate a final increase in 2012 of 62% more listed companies compared to a scenario where Sweden kept its wealth tax. This increase corresponds to 13 more listed companies per million capita. Furthermore, through a fixed effects regression we also find the relationship between the wealth tax abolishment and the number listed companies in Sweden significant at the 1% level. Our findings from analyzing Sweden suggest that a wealth tax can discourage companies from going public. Nevertheless, the generalizability of our result is uncertain.