Taxation and leverage in international banking [electronic resource] / 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

Subject(s):

Genre/Form:

Electronic books.

DDC classification:

336.2 23

LOC classification:

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

Online resources:

EBSCOhost

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.

Holdings ( 1 )
Title notes ( 6 )

Holdings
Item type	Current library	Collection	Call number	Status	Date due	Barcode	Item holds
eBook	e-Library	EBSCO Business		Available

Total holds: 0

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."

Master record variable field(s) change: 072, 082