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

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.