Does Corporate Income Taxation Affect Securitization? Evidence from OECD Banks

29 Pages Posted: 7 Sep 2013 Last revised: 24 Oct 2018

See all articles by Di Gong

Di Gong

University of International Business and Economics (UIBE) - School of Banking and Finance

Shiwei Hu

Independent

Jenny Ligthart

Tilburg University - Center for Economic Research (CentER)

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Date Written: August 6, 2014

Abstract

Corporate income taxation, by affecting the after-tax cost of funding, has implications for a bank's incentive to securitize. Using a sample of OECD banks over the period 1999-2006, we find that corporate income taxation led to more securitization at banks that are constrained in funding markets, while it did not affect securitization at unconstrained banks. This is consistent with prior theory suggesting that the tax effects of securitization depend on the extent to which banks face funding constraints. Our results suggest that a country's tax system has distorting effects on banks' securitization decisions and therefore proposals of new taxes on bank profits are inappropriate.

Keywords: Securitization, Banking, Corporate Income Tax

JEL Classification: G21, H25

Suggested Citation

Gong, Di and Hu, Shiwei and Ligthart, Jenny, Does Corporate Income Taxation Affect Securitization? Evidence from OECD Banks (August 6, 2014). Available at SSRN: https://ssrn.com/abstract=2321069 or http://dx.doi.org/10.2139/ssrn.2321069

Di Gong (Contact Author)

University of International Business and Economics (UIBE) - School of Banking and Finance ( email )

No.10, Huixindong Street
Chaoyang District
Beijing, 100029
China

Shiwei Hu

Independent ( email )

Jenny Ligthart

Tilburg University - Center for Economic Research (CentER) ( email )

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