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
There are 2 versions of this paper
Does Corporate Income Taxation Affect Securitization? Evidence from OECD Banks
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: Suggested Citation