Banks as Tax Planning Intermediaries

Brandon Gipper
Additional contact information
Brandon Gipper: Stanford University

Research Papers from Stanford University, Graduate School of Business

Abstract: We provide the first large-sample evidence of banks playing an important role in facilitating tax planning by client firms. Capturing bank-client relationships using lending contracts and measuring borrower tax avoidance with the three-year cash effective tax rate and the unrecognized tax benefit balance, we document the extent to which banks are associated with tax avoidance by corporate borrowers. In multivariate analyses, we find that the average tax avoidance of a bank's other borrowers is an economically important determinant of a client firm's own tax avoidance. In additional tests, we find evidence consistent with this result being driven in part by banks acting as tax planning intermediaries. Finally, we find that clients experience meaningful increases in tax avoidance when they begin a new relationship with a bank whose existing borrowers are substantial tax avoiders. Overall, our results suggest that banks, in addition to being financial intermediaries, also act as tax planning intermediaries in facilitating corporate tax planning.

Date: 2016-06
New Economics Papers: this item is included in nep-acc, nep-ban and nep-pbe
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.gsb.stanford.edu/faculty-research/worki ... nning-intermediaries

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:3443

Access Statistics for this paper

More papers in Research Papers from Stanford University, Graduate School of Business Contact information at EDIRC.
Bibliographic data for series maintained by ().