The Real Effects of Bank Taxation

Posted: 9 Aug 2017 Last revised: 26 Mar 2018

See all articles by Anna L. Sobiech

Anna L. Sobiech

University of St Andrews, School of Management

John O. S. Wilson

University of St. Andrews

Dimitris K. Chronopoulos

University of St. Andrews - School of Management

Date Written: March 3, 2018

Abstract

The extent to which banks benefit or retard the development of the real economy has been brought into sharp focus since the global financial crisis. Government interventions and policies aimed at containing excessive risks in the banking industry are likely to have implications for funding conditions facing corporates and their resultant strategic investment decisions. Utilising the sudden imposition of a bank-specific gross profit tax, we investigate whether taxation of the banking industry matters for real economic outcomes of corporate borrowers. Using a large sample of matched listed corporates and banks in Japan, we find that banks with a greater tax exposure reduce lending more than less exposed counterparts. Moreover, the imposition of bank taxes reduces credit supply, and leads corporates to reduce levels of investment. These results suggest that taxation of the banking industry propagates in a negative fashion to the real economy by altering the environment in which corporates operate.

Keywords: Tokyo Bank Tax, Firm Investment, Tax Distortions, Tax Exposure, Bank Lending

Suggested Citation

Sobiech, Anna Lucia and Wilson, John O. S. and Chronopoulos, Dimitris K., The Real Effects of Bank Taxation (March 3, 2018). Available at SSRN: https://ssrn.com/abstract=3015463

Anna Lucia Sobiech (Contact Author)

University of St Andrews, School of Management ( email )

The Gateway
North Haugh
St Andrews, Fife KY16 9RJ
United Kingdom

John O. S. Wilson

University of St. Andrews ( email )

North St
Saint Andrews, Fife KY16 9AJ
United Kingdom

Dimitris K. Chronopoulos

University of St. Andrews - School of Management ( email )

The Gateway
North Haugh
St. Andrews, Fife, Scotland KY16 9SS
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Abstract Views
194
PlumX Metrics