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Journal of Financial Services Research

, Volume 48, Issue 3, pp 193–213 | Cite as

Does Corporate Income Taxation Affect Securitization? Evidence from OECD Banks

  • Di GongEmail author
  • Shiwei Hu
  • Jenny E. Ligthart
Article

Abstract

Corporate income taxation, by affecting the after-tax cost of funding, has implications for a bank’s incentive to securitize. Using a sample of OECD banks over the period 1999–2006, we find that corporate income taxation led to more securitization at banks that are constrained in funding markets, while it did not affect securitization at unconstrained banks. This is consistent with prior theories suggesting that the tax effects of securitization depend on the extent to which banks face funding constraints. Our results suggest that current corporate income tax systems have distorting effects on banks’ securitization decisions.

Keywords

Securitization SPVs Corporate income taxes 

JEL Classification

G21 H25 

Notes

Acknowledgments

We are indebted to George Pennacchi and Wolf Wagner for the inspiring discussions. We thank an anonymous referee, Steve Bond, Michael Devereux, Bálint Horváth (discussant), Kebin Ma, José-Luis Peydró and Jing Xing (discussant) for their insightful comments. We too are grateful to participants at the GSS seminar at Tilburg university, 6th International Risk Management Conference, Banking summer school at Barcelona GSE, CBT doctoral meeting 2013 at Oxford University, University of Birmingham, University College London, and 13th FDIC-JFSR Annual Bank Research Conference for their comments. The usual disclaimer applies.

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Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.CentER and Department of EconomicsTilburg UniversityTilburgThe Netherlands
  2. 2.Utrecht University School of EconomicsUtrechtThe Netherlands

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