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Taxation and Corporate Debt: Are Banks Any Different?

Author

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  • Jost H. Heckemeyer
  • Ruud A. de Mooij

Abstract

Variation in the responsiveness of firms to corporate tax incentives toward debt finance is important for understanding the presumed effects of the debt bias on macro-financial stability. This holds especially for the difference in responsiveness between banks and non-banks. Using a large cross-country micro panel of consolidated firm accounts, we find relatively large responses for the biggest non-financial companies, although these effects are less pronounced as conditional leverage ratios increase. The smallest effects are found for large banks. Results are largely robust for attenuation bias.

Suggested Citation

  • Jost H. Heckemeyer & Ruud A. de Mooij, 2017. "Taxation and Corporate Debt: Are Banks Any Different?," National Tax Journal, National Tax Association;National Tax Journal, vol. 70(1), pages 53-76, March.
  • Handle: RePEc:ntj:journl:v:70:y:2017:i:1:p:53-76
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    References listed on IDEAS

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    1. Thomas Hemmelgarn & Daniel Teichmann, 2014. "Tax reforms and the capital structure of banks," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(4), pages 645-693, August.
    2. Murray Z. Frank & Vidhan K. Goyal, 2009. "Capital Structure Decisions: Which Factors Are Reliably Important?," Financial Management, Financial Management Association International, vol. 38(1), pages 1-37, March.
    3. Gordon, Roger H. & Lee, Young, 2001. "Do taxes affect corporate debt policy? Evidence from U.S. corporate tax return data," Journal of Public Economics, Elsevier, vol. 82(2), pages 195-224, November.
    4. Ryo Kato & Shun Kobayashi & Yumi Saita, 2010. "Calibrating the Level of Capital: The Way We See It," Bank of Japan Working Paper Series 10-E-6, Bank of Japan.
    5. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521845731, January.
    6. Reint Gropp & Florian Heider, 2010. "The Determinants of Bank Capital Structure," Review of Finance, European Finance Association, vol. 14(4), pages 587-622.
    7. Feld, Lars P. & Heckemeyer, Jost H. & Overesch, Michael, 2013. "Capital structure choice and company taxation: A meta-study," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2850-2866.
    8. Barrell, Ray & Davis, E. Philip & Karim, Dilruba & Liadze, Iana, 2010. "Bank regulation, property prices and early warning systems for banking crises in OECD countries," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2255-2264, September.
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    Citations

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    Cited by:

    1. Adrian Van Rixtel & Luna Romo González & Jing Yang, 2015. "The determinants of long-term debt issuance by European banks: evidence of two crises," BIS Working Papers 513, Bank for International Settlements.
    2. Leonardo Gambacorta & Giacomo Ricotti & Suresh Sundaresan & Zhenyu Wang, 2017. "The effects of tax on bank liability structure," BIS Working Papers 611, Bank for International Settlements.
    3. repec:men:journl:v:3:y:2017:i:1:p:5-12 is not listed on IDEAS
    4. Merz, Julia & Overesch, Michael, 2016. "Profit shifting and tax response of multinational banks," Journal of Banking & Finance, Elsevier, vol. 68(C), pages 57-68.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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