Interactions between bank levies and corporate taxes: How is bank leverage affected?

Franziska Bremus, Kirsten Schmidt and Lena Tonzer

Journal of Banking & Finance, 2020, vol. 118, issue C

Abstract: Regulatory bank levies set incentives for banks to reduce leverage. At the same time, corporate income taxation makes funding through debt more attractive. In this paper, we explore how regulatory levies affect bank capital structure, depending on corporate income taxation. Based on bank balance sheet data from 2006 to 2014 for a panel of EU-banks, our analysis yields three main results: The introduction of bank levies leads to lower leverage as liabilities become more expensive. This effect is weaker the more elevated corporate income taxes are. In countries charging very high corporate income taxes, the incentives of bank levies to reduce leverage turn insignificant. Thus, bank levies can counteract the debt bias of taxation only partially.

Keywords: Bank levies; Debt bias of taxation; Bank capital structure (search for similar items in EconPapers)
JEL-codes: G21 G28 L51 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426620301400
Full text for ScienceDirect subscribers only

Related works:
Journal Article: Interactions between bank levies and corporate taxes: How is bank leverage affected? (2020)
Working Paper: Interactions between bank levies and corporate taxes: How is bank leverage affected? (2020)
Working Paper: Interactions between bank levies and corporate taxes: How is the bank leverage affected? (2019)
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:eee:jbfina:v:118:y:2020:i:c:s0378426620301400

DOI: 10.1016/j.jbankfin.2020.105874

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().