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De l'efficacité des dépenses fiscales pour l'achat d'actions : le cas du régime d'épargne-actions du Québec

The Quebec Stock Savings Plan (QSSP) is one of the oldest tax expenditures programs put in place by the Quebec government to capitalize small businesses. Subsequently adopted by other provinces, QSSP is primarily intended to increase the demand for newly issued shares of small businesses. This increase should, in turn, boost the share price and lower the cost of equity for small firms. While it has been in force for 25 years in Quebec, evidence of the effectiveness of this program is sparse. This paper contains an empirical examination of this program that determines whether it constitutes an effective means of financing emerging companies.

We concisely analyze the arguments in favor of this tax expenditures program, and summarize its evolution and findings of earlier studies. We observe that the QSSP has been frequently modified, and that the target companies were successively large, small, and medium-sized firms and funds (Part 1). Our conceptual analysis of the rationale and the required success conditions for this program clarifies the reasons for these adjustments and failures (Part 2). We show that several conditions must be met to significantly decrease the issuers' equity cost. The issue should be sold mainly in Quebec to individual investors, and it should be an initial public offering. Seasoned offerings are sold at market price, and the investor is the only beneficiary of the program. The same situation prevails when the shares are sold to non-taxable investors, or to non-Quebec residents. In terms of public policy, these conditions can be met only by small companies, which launch IPOs modest enough to be sold entirely to individual investors in Quebec.

In the third section of the paper, we analyze the QSSP issues from 1992 to 2002, and show that few of these issues satisfied the efficiency conditions of the program. As designed in 1992, the program should mainly benefit investors rather than issuers, because the stock issues are sold largely outside of the province to non-eligible investors, who do not qualify for the credit. Seasoned issues now predominate. As the price of these issues is set by the market, a significant effect on the financing cost is unlikely. Although the QSSP might have increased the demand for securities and have permitted issues which would not be realizable without the program, the extremely high issuing activity across the provinces casts doubt on this argument. The QSSP funds mainly own shares of large corporations. Based on the proportion of capital of small emerging companies held in the funds, the funds' effect on small firm finance is probably insignificant, and incurs a high cost for the government.

Given the efficiency conditions of the QSSP program, a significant effect of the program on the equity cost of growing companies is currently unlikely. To conclude, we propose some research avenues that could confirm the indirect evidence presented in our paper.

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