Corporate tax changes and credit costs

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Title: Corporate tax changes and credit costs
Authors: Deli, YotaDelis, Manthos D.Hasan, IftekharPolitsidis, Panagiotis N.Saunders, Anthony
Permanent link: http://hdl.handle.net/10197/13072
Date: Jul-2022
Online since: 2022-08-17T15:25:43Z
Abstract: We examine changes in the corporate tax rate across the U.S. and their implications on the pricing and quantity of loans. We find an asymmetric effect on the cost of credit: loan spreads decrease by approximately 5.9 basis points in response to a one percentage tax cut, but they are insensitive to corporate tax increases. Primarily, a debt restructuring effect (working via firm’s leverage) and, secondarily, a credit supply effect (working via bank market power and bank capital) drive the easing effect of tax cuts on equilibrium loan pricing, while the effect on the equilibrium quantity of loans is insignificant.
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Start page: 1
End page: 18
Series/Report no.: UCD Centre for Economic Research Working Paper Series; WP2022/21
Copyright (published version): 2022 the Authors
Keywords: Corporate taxationCost of creditSyndicated loansLoan demandLoan supply
JEL Codes: G21; F31; F33; F34
Language: en
Status of Item: Not peer reviewed
This item is made available under a Creative Commons License: https://creativecommons.org/licenses/by-nc-nd/3.0/ie/
Appears in Collections:Economics Working Papers & Policy Papers

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