Taxation and leverage in international banking / prepared by Grace Weishi Gu, Ruud de Mooij, and Tigran Poghosyan.

By:

Gu, Grace [author.]

Contributor(s):

Material type: Text

text

Media type:

computer

Carrier type:

online resource

ISBN:

9781475549386
1475549385
147554068X
9781475540680
1475572204
9781475572209

Subject(s):

Genre/Form:

DDC classification:

336.2 23

LOC classification:

HG3881.5.I58 W67 No. 12/281eb

Online resources:

Click here to access online

Contents:

Cover; Contents; I. Introduction; II. Theoretical Model; III. Empirical Methodology and Data; A. Methodology; B. Data; IV. Results; A. Baseline Regressions; B. Robustness Checks; C. Extension: Capital Tightness; V. Conclusions; References; Technical Appendix; Figures; 1. Bank Leverage Histogram; Tables; 1. Variable Source and Construction; 2. Summary Statistics; 3. Correlations; 4. Number of Banks; 5. Average Financial Leverage and Tax Rates; 6. Baseline Estimation Results; 7. Robustness Check Estimation Results: Standard Errors; 8. Robustness Check Estimation Results: Alternatives.

9. Robustness Check Estimation Results: Leverage Skewness and Tax Trend10. Robustness Check Estimation Results: Subsamples; 11. Estimation Results: Capital Tightness.

Summary: 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 vis-a-vis foreign subsidiary banks affect the intra-bank capital structure through international debt shifting. Using a novel subsidiary-level dataset for 558 commercial bank subsidiaries of the 86 largest multinational banks in the world, we find that taxes matter significantly, through both the traditional debt bias channel and the international debt shifting that is due to the international tax differentials. The latter channel is more robust and tends to be quantitatively more important. Our results imply that taxation causes significant international debt spillovers through multinational banks, which has potentially important implications for tax policy.

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Title from PDF title page (IMF Web site, viewed Dec. 5, 2012).

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 vis-a-vis foreign subsidiary banks affect the intra-bank capital structure through international debt shifting. Using a novel subsidiary-level dataset for 558 commercial bank subsidiaries of the 86 largest multinational banks in the world, we find that taxes matter significantly, through both the traditional debt bias channel and the international debt shifting that is due to the international tax differentials. The latter channel is more robust and tends to be quantitatively more important. Our results imply that taxation causes significant international debt spillovers through multinational banks, which has potentially important implications for tax policy.

Includes bibliographical references.

"Fiscal Affairs Department."

"November 2012."

9. Robustness Check Estimation Results: Leverage Skewness and Tax Trend10. Robustness Check Estimation Results: Subsamples; 11. Estimation Results: Capital Tightness.

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