2012
DOI: 10.5089/9781475572209.001
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Taxation and Leverage in International Banking

Abstract: This paper explores how corporate taxes affect the financial structure of multinational banks. Guided by a simple theory of optimal capital structure it tests (i) whether corporate taxes induce subsidiary banks to raise their debt-asset ratio in light of the traditional debt bias; and (ii) whether international corporate tax differentials visa -vis foreign subsidiary banks affect the intra-bank capital structure through international debt shifting. Using a novel subsidiary-level dataset for 558 commercial bank… Show more

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Cited by 12 publications
(15 citation statements)
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“…The partial effect implies that an increase of 10 percentage points in the average corporate tax rate in other group locales decreases the debt ratio of a bank entity by roughly two percentage points on average. The order of magnitude of the partial effect is consistent with the evidence in Gu, de Mooij, and Poghosyan (), who report an estimated linear coefficient of around 0.2 for the average tax rate of the groups, expressed as a difference with respect to that in the host country. The estimated impacts of the other economic and policy controls are quantitatively similar to those in specification 1.…”
Section: Econometric Resultssupporting
confidence: 88%
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“…The partial effect implies that an increase of 10 percentage points in the average corporate tax rate in other group locales decreases the debt ratio of a bank entity by roughly two percentage points on average. The order of magnitude of the partial effect is consistent with the evidence in Gu, de Mooij, and Poghosyan (), who report an estimated linear coefficient of around 0.2 for the average tax rate of the groups, expressed as a difference with respect to that in the host country. The estimated impacts of the other economic and policy controls are quantitatively similar to those in specification 1.…”
Section: Econometric Resultssupporting
confidence: 88%
“…We do not take into account the treatment of foreign income in the calculation of the tax measures. Although this is a simplification, it is fully consistent with the bulk of the literature on debt shifting, including the paper by Gu, de Mooij, and Poghosyan () on which we build, that considers the statutory rate as the relevant metric for debt shifting.…”
supporting
confidence: 64%
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