Legal forms and regulatory responses: a comparative analysis of S and C corporation community banks

Shi Qi () and Sepideh Raei ()
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Shi Qi: William and Mary
Sepideh Raei: Utah State University

Economics of Governance, 2025, vol. 26, issue 4, No 4, 559-590

Abstract: Abstract This study investigates the differential responses of Subchapter S and C corporation banks within the U.S. community banking sector to significant policy changes following the 2007–2008 financial crisis. Using bank-level data from 2003 to 2019 and employing a difference-in-differences analysis, we explore how legal forms influence banks’ yields on earning assets and funding costs. Our findings reveal that S banks, due to their unique tax status and capital access limitations, exhibited more pronounced reductions in asset yields and increased funding costs compared to C banks.

Keywords: Community banks; Legal forms of organization; Financial regulation (search for similar items in EconPapers)
JEL-codes: G21 K23 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10101-025-00339-x

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