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Does Taxation on Banks Tax Bank Borrowers? Evidence from the Tokyo Bank Tax Experiment

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  • Peter Hull

    () (Federal Reserve Bank of New York)

  • Masami Imai

    () (Department of Economics, Wesleyan University)

Abstract

We investigate the economic impacts of bank taxation on the value of banks and that of borrowing firms, exploiting the surprise announcement of a tax by the Tokyo metropolitan government as a natural experiment. We find that the tax announcement had broad effects on the share prices of banks, although the effects are stronger for a subset of soon-to-be taxed banks. However, the adverse effects of the tax on bank borrowers, although statistically significant, turn out to be quantitatively small (a half of the effects on bank share prices). These results suggest that the adverse economic consequence of bank taxation is felt primarily on banks themselves.

Suggested Citation

  • Peter Hull & Masami Imai, 2011. "Does Taxation on Banks Tax Bank Borrowers? Evidence from the Tokyo Bank Tax Experiment," Wesleyan Economics Working Papers 2011-005, Wesleyan University, Department of Economics.
  • Handle: RePEc:wes:weswpa:2011-005
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