Franklin

Debt, Taxes, and Banks [electronic resource] Keen, Michael.

Author/Creator:
Keen, Michael.
Publication:
Washington, D.C. : International Monetary Fund, 2012.
Series:
IMF eLibrary
IMF Working Papers; Working Paper No. 12/48.
IMF Working Papers; Working Paper No. 12/48
Format/Description:
Government document
Book
1 online resource (32 p.)
Local subjects:
Bank assets.
Bank capital.
Bank earnings.
Bank policy.
Bank regulation.
Bank size.
Banking.
Banks.
Business taxation.
Business taxes.
Business Taxes and Subsidies.
Capital and Ownership Structure.
Capital regulation.
Capital requirement.
Commercial banks.
Corporate tax.
Corporate tax rate.
Corporate tax rates.
Corporate taxes.
Deposit insurance.
Deposit insurance coverage.
Economic models.
Financial risk.
Financing Policy.
Interest payments.
Investment banks.
Measure of profitability.
Mortgages.
Other Depository Institutions.
Ownership structure.
Rate of return.
Return on assets.
Return on equity.
Risk exposure.
Statutory corporate tax rates.
Statutory tax rate.
Tax incentive.
Tax policy.
Tax rate.
Tier 1 capital.
Tier 2 capital.
Germany.
Japan.
Summary:
Understanding the impact of the asymmetric tax treatment of debt and equity on the capital structures of financial institutions is critical to shaping and assessing responses to the problem of excessive leverage that underlay the 2009 financial crisis - but there is no empirical evidence to draw on. Guided by a simple model of banks? financing decisions in the presence of both regulatory constraints and tax asymmetries, this paper explores the impact of corporate tax bias on bank leverage, the use of hybrid instruments and regulatory capital ratios for a panel of over 14,000 commercial banks in 82 countries over nine years. On average, the sensitivity of banks? debt choices proves very similar to that of non-financial firms, consistent with rough offsetting of two opposing effects suggested by the theory. As the model predicts, somewhat counter-intuitively, the impact of tax on hybrids is generally weak or insignificant. Responsiveness to taxation varies significantly across banks, however: those holding smaller equity buffers, and larger banks, are noticeably less sensitive to tax.
Notes:
Description based on print version record.
Contributor:
Keen, Michael.
Mooij, Ruud A. de.
Other format:
Print Version:
ISBN:
1463937091:
9781463937096
ISSN:
1018-5941
Publisher Number:
10.5089/9781463937096.001
Access Restriction:
Restricted for use by site license.
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