Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/202301
Authors: 
Fatica, Serena
Heynderickx, Wouter
Pagano, Andrea
Year of Publication: 
2018
Series/Report no.: 
JRC Working Papers in Economics and Finance No. 2018/9
Abstract: 
Using bank balance sheet data, we find evidence that leverage and asset risk of European multinational banks in the crisis and post-crisis period is affected by corporate taxes in their host country as well as by the tax rates in all the jurisdictions where the banking group operates. Then, we evaluate the effects that establishing tax neutrality between debt and equity finance has on systemic risk. We show that the degree of coordination in implementing the hypothetical tax reform matters. In particular, a coordinated elimination of the tax advantage of debt would significantly reduce systemic losses in the event of a severe banking crisis. By contrast, uncoordinated tax reforms are not equally beneficial. This is because national tax policies generate spillovers through cross-border bank activities and tax-driven strategic allocation of debt and asset risk across group affiliates.
Subjects: 
Corporate tax
Debt bias
Debt shifting
Multinational banks
Leverage
JEL: 
E32
F41
F44
F45
Persistent Identifier of the first edition: 
ISBN: 
978-92-79-93403-2
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.