Does Corporate Income Taxation Affect Securitization? Evidence from OECD Banks

European Banking Center Discussion Paper No. 2013-013

CentER Discussion Paper Series No. 2013-067

29 Pages Posted: 30 Nov 2013

See all articles by Di Gong

Di Gong

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

Jenny Ligthart

Tilburg University - Center for Economic Research (CentER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 1, 2013

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 Ligthart, Jenny, Does Corporate Income Taxation Affect Securitization? Evidence from OECD Banks (November 1, 2013). European Banking Center Discussion Paper No. 2013-013, CentER Discussion Paper Series No. 2013-067, Available at SSRN: https://ssrn.com/abstract=2361445 or http://dx.doi.org/10.2139/ssrn.2361445

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

Jenny Ligthart

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

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