As for venture capital, it represents a negligible share of firms’ external finance, much lower than in the United States. Firms’ capital bases can be strengthened by pursuing a more neutral tax treatment of equity compared to debt, through, for example, an allowance for equity in corporate income tax. Such allowances could be strengthened for firms that list their shares on stock exchanges.
Equity financing can also be supported by tax incentives, targeted for instance to innovative firms or venture capital investors. These are examples of measures that have been introduced in Italy in recent years. Second, informational barriers about corporate borrowers, in particular SMEs, should be overcome. Financial claims on unlisted firms are typically risky and illiquid. They call for specific professional skills and information.