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dc.contributor.authorMehran, Hamiden_US
dc.contributor.authorSuher, Michaelen_US
dc.description.abstractThis paper investigates the effect at the bank and industry level of a 1996 tax law change allowing commercial banks to elect S-corporation status. By the end of 2007, roughly one in three commercial banks had either opted for or converted to the S-corporation form of organization. Our study analyzes the effect of this conversion on bank dividend payouts. It also examines the effect S-corporation status has on a community bank's likelihood of sell-off and measures a firm's sensitivity to tax rates based on its choice of organizational form. We document that dividend payouts increase substantially after a bank's conversion to S status. Moreover, community banks that convert are significantly less likely to be sold than their C-corporation peers. We estimate a tax rate elasticity of conversion in the range of 2 to 3 percent for every 1-percentage-point change in relative tax rates. Overall, our results provide evidence that Subchapter S status has significant effects on bank conduct and industry structure.en_US
dc.publisher|aFederal Reserve Bank of New York |cNew York, NYen_US
dc.relation.ispartofseries|aStaff Report, Federal Reserve Bank of New York |x369en_US
dc.subject.keywordTax lawen_US
dc.subject.keywordS corporationsen_US
dc.subject.keywordorganizational formen_US
dc.subject.keyworddividend policyen_US
dc.subject.keywordindustry structureen_US
dc.titleThe impact of tax law changes on bank dividend policy, sell-offs, organizational form, and industry structureen_US
dc.typeWorking Paperen_US

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