Taxation and leverage in international banking

Grace Gu, Ruud de Mooij and Tigran Poghosyan

International Tax and Public Finance, 2015, vol. 22, issue 2, 177-200

Abstract: This paper explores how corporate taxes affect the capital structure of multinational banks. Guided by a theory of optimal capital structure, it tests whether (i) corporate tax rates induce subsidiary banks to raise leverage in light of traditional debt bias; and (ii) cross-country corporate tax differences affect a subsidiary’s leverage through international debt shifting. Using a novel data set for 756 commercial bank subsidiaries of 91 largest multinational banks in the world, we find that taxes matter significantly through both channels. Copyright Springer Science+Business Media New York (outside the USA) 2015

Keywords: Multinational banks; Corporate tax; Debt bias; Debt shifting; G21; G32; H25 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (35)

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Working Paper: Taxation and Leverage in International Banking (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:itaxpf:v:22:y:2015:i:2:p:177-200

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DOI: 10.1007/s10797-014-9307-2

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