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Does Corporate Income Taxation Affect Securitization? Evidence from OECD Banks

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  • Gong, D.
  • Ligthart, J.E.

    (Tilburg University, Center for Economic Research)

Abstract

Abstract: Corporate income taxation, by aff ecting 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 fi nd that corporate income taxation led to more securitization at banks that are constrained in funding markets, while it did not a ffect securitization at unconstrained banks. This is consistent with prior theory suggesting that the tax eff ects of securitization depend on the extent to which banks face funding constraints. Our results suggest that a country's tax system has distorting eff ects on banks' securitization decisions and therefore proposals of new taxes on bank profi ts are inappropriate.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2013-067.

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Date of creation: 2013
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Handle: RePEc:dgr:kubcen:2013067

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Web page: http://center.uvt.nl

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Keywords: Securitization; Banking; Corporate Income Tax;

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  1. Hänsel, Dennis N. & Bannier, Christina E., 2008. "Determinants of European banks' engagement in loan securitization," Discussion Paper Series 2: Banking and Financial Studies 2008,10, Deutsche Bundesbank, Research Centre.
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  9. Chiorazzo, Vincenzo & Milani, Carlo, 2011. "The impact of taxation on bank profits: Evidence from EU banks," Journal of Banking & Finance, Elsevier, vol. 35(12), pages 3202-3212.
  10. Gary B. Gorton & Nicholas S. Souleles, 2007. "Special Purpose Vehicles and Securitization," NBER Chapters, in: The Risks of Financial Institutions, pages 549-602 National Bureau of Economic Research, Inc.
  11. Brent Ambrose & Michael LaCour-Little & Anthony Sanders, 2005. "Does Regulatory Capital Arbitrage, Reputation, or Asymmetric Information Drive Securitization?," Journal of Financial Services Research, Springer, vol. 28(1), pages 113-133, October.
  12. Greenbaum, Stuart I. & Thakor, Anjan V., 1987. "Bank funding modes : Securitization versus deposits," Journal of Banking & Finance, Elsevier, vol. 11(3), pages 379-401, September.
  13. Thomas, Hugh, 2001. "Effects of Asset Securitization on Seller Claimants," Journal of Financial Intermediation, Elsevier, vol. 10(3-4), pages 306-330, July.
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