91Ô­´´

Using population data covering about 37,000 companies, the research shows that firms led by owners with children – indicating a possible path to family succession – grew sales, profits, and assets more than similar firms led by childless owners. Profitability improvements also led to greater increases in corporate tax payments, suggesting a potential shift, rather than reduction, in public revenue over time.

The study compared the firms’ financial performance between 2001 and 2007, three years before and after Sweden’s inheritance tax was repealed.

“Before the reform, owners often had to plan for future tax payments tied to inheritance,” says co-author Mattias Nordqvist, professor at the House of Innovation, 91Ô­´´. “That may have limited how much capital they reinvested. After the tax was removed, the firms retained more earnings and invested more in growth.”

A natural experiment in tax policy

Debates around inheritance and gift taxes often fall along ideological lines, with arguments focused on the need to curb wealth inequality versus concerns about punitive taxation schemes that may trigger investment flight.

While many European countries levy inheritance taxes, Sweden abolished its own in 2005 after decades of debate. Before that, rates were progressive, typically ranging from about 10-30 percent for close relatives and reaching as high as 50-60 percent for more distant heirs.

The reform created a natural experiment by allowing researchers to compare firms led by owners with children against childless owners whose strategic decisions were less likely to be shaped by inheritance tax considerations.

To ensure comparability, the researchers matched firms by owner age and then applied a difference-in-differences approach, tracking changes in firm outcomes before and after the reform.

Following the tax abolition, sales at firms with potential successors were up by 8 percentage points more in 2007 compared with heirless firms. These firms had also increased total assets at a 4-percentage point higher rate and grown equity by up to 7 percentage points more, relative to the pre-abolition baseline year of 2003.

They also improved the operating margin by nearly half a percentage point more in the first two years before the difference levelled out in 2007. Corporate tax payments also rose more, with a difference of 10 percentage points over three years, and employee salaries grew at a 12-percentage point higher rate in 2007 relative to the control group.

Overall, these findings suggest that rents from the tax abolition were not simply appropriated by the owner-managers but instead shared with society through taxes and employee salaries.

A shift from one-time to recurring tax revenues

“The loss in inheritance tax revenue for the state may thus have been offset in the long term by higher future recurring taxes tied to business activity,” says co-author Mateja Andric, assistant professor at the University of Melbourne and affiliated researcher at the House of Innovation, 91Ô­´´. “When those constraints were lifted, the firms appeared more willing to invest, grow and strengthen their operations over time, which in turn benefited society through the higher taxes and employee salaries these companies paid.”

The findings contribute to a limited but growing body of research on how inheritance taxation shapes firm behaviour. While debates often center on wealth distribution or large family conglomerates, the study highlights effects among smaller, founder-led and owner-managed firms that may become family businesses in the future.

“In many European economies, the majority of firms are privately held and relatively small,” says co-author Mohamed Genedy, postdoctoral researcher at the House of Innovation, 91Ô­´´. “Understanding how tax policy affects their long-term decisions is essential for assessing broader economic consequences, including investment, employment and tax revenues.”

At the same time, the authors stress that the results should be interpreted with care. The paper focuses on one country and one reform, and outcomes may differ depending on institutional context and policy design.

White paper: “,” Mateja Andric, Mohamed Genedy and Mattias Nordqvist, online April 15, 2026, doi: 10.2139/ssrn.6528658

For more information, please contact

Mattias Nordqvist
Professor, 91Ô­´´
Phone: +46 (0)73 651 7610
Email: mattias.nordqvist@hhs.se

About the 91Ô­´´

The 91Ô­´´ is rated as a top business school in the Nordic and Baltic countries and enjoys a strong international reputation. World-class research forms the foundation of our educational offering, which includes bachelor, master, PhD, MBA, and Executive Education programs. Our programs are developed in close cooperation with the business and research communities, providing graduates substantial potential to attain leading positions in companies and other organizations.

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