---
_id: '4703'
abstract:
- lang: eng
text: Investments with exit flexibility require decisions regarding both the investment
and holding period. Because selling an investment often leads to taxable capital
gains, which crucially depend on the duration of an investment, we investigate
the impact of capital gains taxation on exit timing under different tax systems.
We observed that capital gains taxation delays exit decisions but loses its decision
relevance for very long holdings. Often the optimal exit time, which indicates
the maximal present value of future cashflows, cannot be determined analytically.
However, we identify the breakeven exit time that guarantees present values exceeding
those of an immediate sale. While, after-taxes, an immediate sale is often optimal,
long holding periods might also be attractive for investors depending on the degree
of income and corporate tax integration. A classic corporate tax system often
indicates holdings over more than 100 periods. By contrast, a shareholder relief
system indicates the earliest breakeven exit time and thus the highest level of
exit timing flexibility. Surprisingly, high retention rates are likely to accelerate
sales under a classic corporate system. Additionally, the worst exit time, which
should be avoided by investors, differs tremendously across tax systems. For an
integrated tax system with full imputation, the worst time is reached earlier
than under partial or non-integrated systems. These results could help to predict
investors’ behavior regarding changes in capital gains taxation and thus are of
interest for both investors and tax policymakers. Furthermore, the results emphasize
the need to control for the underlying tax system in cross-country empirical studies.
author:
- first_name: Annika
full_name: Hegemann, Annika
last_name: Hegemann
- first_name: Angela
full_name: Kunoth, Angela
last_name: Kunoth
- first_name: Kristina
full_name: Rupp, Kristina
last_name: Rupp
- first_name: Caren
full_name: Sureth-Sloane, Caren
id: '530'
last_name: Sureth-Sloane
orcid: ' 0000-0002-8183-5901'
citation:
ama: Hegemann A, Kunoth A, Rupp K, Sureth-Sloane C. Hold or Sell? How Capital Gains
Taxation Affects Holding Decisions. Review of Managerial Science. 2017;11(3):571-603.
doi:10.1007/s11846-016-0197-9
apa: Hegemann, A., Kunoth, A., Rupp, K., & Sureth-Sloane, C. (2017). Hold or
Sell? How Capital Gains Taxation Affects Holding Decisions. Review of Managerial
Science, 11(3), 571–603. https://doi.org/10.1007/s11846-016-0197-9
bibtex: '@article{Hegemann_Kunoth_Rupp_Sureth-Sloane_2017, title={Hold or Sell?
How Capital Gains Taxation Affects Holding Decisions}, volume={11}, DOI={10.1007/s11846-016-0197-9 }, number={3}, journal={Review of Managerial Science},
author={Hegemann, Annika and Kunoth, Angela and Rupp, Kristina and Sureth-Sloane,
Caren}, year={2017}, pages={571–603} }'
chicago: 'Hegemann, Annika, Angela Kunoth, Kristina Rupp, and Caren Sureth-Sloane.
“Hold or Sell? How Capital Gains Taxation Affects Holding Decisions.” Review
of Managerial Science 11, no. 3 (2017): 571–603. https://doi.org/10.1007/s11846-016-0197-9 .'
ieee: 'A. Hegemann, A. Kunoth, K. Rupp, and C. Sureth-Sloane, “Hold or Sell? How
Capital Gains Taxation Affects Holding Decisions,” Review of Managerial Science,
vol. 11, no. 3, pp. 571–603, 2017, doi: 10.1007/s11846-016-0197-9 .'
mla: Hegemann, Annika, et al. “Hold or Sell? How Capital Gains Taxation Affects
Holding Decisions.” Review of Managerial Science, vol. 11, no. 3, 2017,
pp. 571–603, doi:10.1007/s11846-016-0197-9
.
short: A. Hegemann, A. Kunoth, K. Rupp, C. Sureth-Sloane, Review of Managerial Science
11 (2017) 571–603.
date_created: 2018-10-12T08:38:21Z
date_updated: 2024-01-30T12:43:17Z
department:
- _id: '187'
- _id: '635'
doi: '10.1007/s11846-016-0197-9 '
intvolume: ' 11'
issue: '3'
language:
- iso: eng
main_file_link:
- open_access: '1'
oa: '1'
page: 571-603
publication: Review of Managerial Science
quality_controlled: '1'
status: public
title: Hold or Sell? How Capital Gains Taxation Affects Holding Decisions
type: journal_article
user_id: '74000'
volume: 11
year: '2017'
...