Konferenzbeitrag
Profit Taxation and Bank Risk Taking
How can tax policy improve financial stability? Recent studies point to large potential stability gains from a reform that eliminates the debt bias in corporate taxation. Such a reform reduces bank leverage. This paper emphasizes a novel, complementary channel: bank risk taking. We model the portfolio choice of banks under moral hazard and thereby highlight the 'incentive function' of equity. The corporate income tax influences risk-taking incentives through the cost of equity relative to deposits, the after-tax returns on different portfolios, and future bank profits. The analysis yields two novel findings: A tax reform which eliminates the debt bias discourages risk taking and reduces bank failure risk. Raising the corporate tax rate can also reduce risk taking in the short run, but permanent tax hikes have destabilizing long-term effects.
- Language
-
Englisch
- Bibliographic citation
-
Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2019: 30 Jahre Mauerfall - Demokratie und Marktwirtschaft - Session: Finance - Banking I ; No. A10-V1
- Classification
-
Wirtschaft
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Financial Institutions and Services: Government Policy and Regulation
Business Taxes and Subsidies including sales and value-added (VAT)
- Subject
-
Corporate taxation
tax reform
risk taking
financial stability
- Event
-
Geistige Schöpfung
- (who)
-
Kogler, Michael
- Event
-
Veröffentlichung
- (who)
-
ZBW - Leibniz-Informationszentrum Wirtschaft
- (where)
-
Kiel, Hamburg
- (when)
-
2019
- Handle
- Last update
- 10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Konferenzbeitrag
Associated
- Kogler, Michael
- ZBW - Leibniz-Informationszentrum Wirtschaft
Time of origin
- 2019
Other Objects (12)
Royalty Taxation under Tax Competition and Profit Shifting
Profit Taxation, Innovation and the Financing of Heterogeneous Firms
Global Imbalances and Bank Risk-Taking
Funding and Taxation of Greek Non Profit Organizations and Enterprises
Profit Taxation and Bank Risk Taking
Bank Risk Taking, Credit Booms and Monetary Policy
Where Does Multinational Profit Go with Territorial Taxation? Evidence from the UK
Transfer pricing manipulation, tax penalty cost and the impact of foreign profit taxation
Bank Risk Taking and Competition: Evidence from Regional Banking Markets
Profit Sharing and Relative Consumption
Balancing risk taking and financial regulation
Social Reference Points and Risk Taking
Royalty Taxation under Tax Competition and Profit Shifting
Profit Taxation, Innovation and the Financing of Heterogeneous Firms
Global Imbalances and Bank Risk-Taking
Funding and Taxation of Greek Non Profit Organizations and Enterprises
Profit Taxation and Bank Risk Taking
Bank Risk Taking, Credit Booms and Monetary Policy
Where Does Multinational Profit Go with Territorial Taxation? Evidence from the UK
Transfer pricing manipulation, tax penalty cost and the impact of foreign profit taxation
Bank Risk Taking and Competition: Evidence from Regional Banking Markets
Profit Sharing and Relative Consumption
Balancing risk taking and financial regulation
Social Reference Points and Risk Taking
Royalty Taxation under Tax Competition and Profit Shifting
Profit Taxation, Innovation and the Financing of Heterogeneous Firms
Global Imbalances and Bank Risk-Taking
Funding and Taxation of Greek Non Profit Organizations and Enterprises
Profit Taxation and Bank Risk Taking
Bank Risk Taking, Credit Booms and Monetary Policy
Where Does Multinational Profit Go with Territorial Taxation? Evidence from the UK
Transfer pricing manipulation, tax penalty cost and the impact of foreign profit taxation
Bank Risk Taking and Competition: Evidence from Regional Banking Markets
Profit Sharing and Relative Consumption
Balancing risk taking and financial regulation