Taxation and Leverage in International Banking

Taxation and Leverage in International Banking
Author: Ms.Grace Weishi Gu
Publisher: International Monetary Fund
Total Pages: 35
Release: 2012-11-30
Genre: Business & Economics
ISBN: 1475572204


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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.


Taxation and Leverage in International Banking
Language: en
Pages: 35
Authors: Ms.Grace Weishi Gu
Categories: Business & Economics
Type: BOOK - Published: 2012-11-30 - Publisher: International Monetary Fund

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This paper explores how corporate taxes affect the financial structure of multinational banks. Guided by a simple theory of optimal capital structure it tests (
Taxation, Bank Leverage, and Financial Crises
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Authors: Ruud A. de Mooij
Categories: Business & Economics
Type: BOOK - Published: 2013-02-25 - Publisher: International Monetary Fund

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That most corporate tax systems favor debt over equity finance is now widely recognized as, potentially, amplifying risks to financial stability. This paper mak
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Pages: 32
Authors: Mr.Michael Keen
Categories: Business & Economics
Type: BOOK - Published: 2012-02-01 - Publisher: International Monetary Fund

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Understanding the impact of the asymmetric tax treatment of debt and equity on the capital structures of financial institutions is critical to shaping and asses
International Taxation of Banking
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Categories: Law
Type: BOOK - Published: 2020-02-20 - Publisher: Kluwer Law International B.V.

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Banking is an increasingly global business, with a complex network of international transactions within multinational groups and with international customers. T
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Language: en
Pages: 29
Authors: Mr.Jost Heckemeyer
Categories: Business & Economics
Type: BOOK - Published: 2013-10-29 - Publisher: International Monetary Fund

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This paper explores whether corporate tax bias toward debt finance differs between banks and nonbanks, using a large panel of micro data. On average, it finds t