Corporate tax changes and credit costs

Yota Deli, Manthos D. Delis, Iftekhar Hasan, Panagiotis N. Politsidis and Anthony Saunders

No 202518, Working Papers from School of Economics, University College Dublin

Abstract: We examine changes in the corporate tax rate across the U.S. and their implications on the pricing and quantity of loans. We find that the cost of credit decreases (increases) by approximately ten (nine) basis points in response to a one percentage tax cut (hike). The estimates are more pronounced for large tax decreases and are relatively uniform across loan types. Our findings mainly originate from the demand side, with large and more profitable firms being able to mitigate the effects of the decrease in the corporate tax rate. The effect on the equilibrium loan amount is statistically and economically insignificant, consistent with a weak supply effect and an inelastic loan supply curve.

Keywords: Corporate taxation; Cost of credit; Syndicated loans; Loan demand; Loan supply (search for similar items in EconPapers)
JEL-codes: F31 F33 F34 G21 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2025-07
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