Real Tax Effects and Tax Perception Effects in Decisions on Asset Allocation

Abstract

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The Effect of Straight-Line and Accelerated Depreciation Rules on Risky Investment Decisions—An Experimental Study

“…As discussed by [3], one explanation for this result could be that introducing a subsidy results in a more complex decision environment, leading investors to decrease their willingness to take risks. A similar observation that points in this direction can be found in [45]. To analyze this perception bias, we use two treatments with and without subsidy, but adapt the gross returns in such a way that the net returns are identical in both treatments.…”

“…They observe an unexpected high willingness to take a risk under an income tax, although the gross payoffs are adapted in such a way that both settings (with and without tax) are identical in net terms, and thus, the same decision pattern was expected. In contrast, [45] find that introducing an income tax with or without a full loss offset provision leads investors to reduce their willingness to take risks, although the gross investments are adjusted accordingly to achieve identical net investments. Ackermann et al [3] study how taxes and subsidies influence investment behavior.…”