Code for: Capital Gains Taxes and Real Corporate Investment: Evidence from Korea

This paper assesses the effects of capital gains taxes on investment in Korea, where capital gains tax rates vary at the firm-level by firm size. Following a reform in 2014, firms with a tax cut increased investment by 34 log points and issued more equity by 9 cents per dollar of lagged revenue, relative to unaffected firms. Additionally, the effects were larger for firms that appeared more cash-constrained or went public after the reform. Taken together, these findings are consistent with the “traditional view” predicting that lower payout taxes spur equity-financed investment by increasing marginal returns on investment.