Does Corporate Income Taxation Affect Securitization? Evidence from OECD Banks

D. Gong, J.E. Ligthart

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Abstract

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 fi nd 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 profi ts are inappropriate.
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Number of pages29
Volume2013-067
Publication statusPublished - 2013

Publication series

NameCentER Discussion Paper
Volume2013-067

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Keywords

  • Securitization
  • Banking
  • Corporate Income Tax

Cite this

Gong, D., & Ligthart, J. E. (2013). Does Corporate Income Taxation Affect Securitization? Evidence from OECD Banks. (CentER Discussion Paper; Vol. 2013-067). Tilburg: Economics.