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Do tax benefits conferred to Sub-S banks affect their deposit or loan rates?

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  • Depken II, Craig A.
  • Hollans, Harris
  • Swidler, Steve

Abstract

Positive economics predicts that Sub-S banks, with no taxes paid at the corporate level, will price their products lower than otherwise identical C corporation banks in a competitive environment. Alternatively, if banks price bundle their products, Sub-S tax benefits might have little (no) effect on product rates. The empirical analysis finds that Sub-S deposit (loan) rates are equal to or lower (higher) than similar C corporation bank rates. Thus, there is little evidence of any tax benefits accruing to Sub-S bank customers. In contrast, tax-exempt credit unions do offer higher deposit rates and lower loan rates than C corporation banks.

Suggested Citation

  • Depken II, Craig A. & Hollans, Harris & Swidler, Steve, 2010. "Do tax benefits conferred to Sub-S banks affect their deposit or loan rates?," Finance Research Letters, Elsevier, vol. 7(4), pages 238-245, December.
    • Handle: RePEc:eee:finlet:v:7:y:2010:i:4:p:238-245
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    References listed on IDEAS

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    1. R. Alton Gilbert & Adam M. Zaretsky, 2003. "Banking antitrust: are the assumptions still valid?," Review, Federal Reserve Bank of St. Louis, vol. 85(Nov), pages 29-52.
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    1. Edward R. Lawrence & Ca Nguyen & Alejandro Pacheco, 2024. "Interest Rate Competition among C Banks, S Banks, and Credit Unions," Journal of Financial Services Research, Springer;Western Finance Association, vol. 65(2), pages 219-242, June.
    2. Russell Kashian & Ronald Tittle & Richard Cummings & Peter Westort, 2018. "Performance and growth among de novo subchapter-s banks," Economics Bulletin, AccessEcon, vol. 38(4), pages 2353-2361.
    3. Ho, Po-Hsin & Lin, Chih-Yung & Tsai, Wei-Che, 2016. "Effect of country governance on bank privatization performance," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 3-18.
    4. Gawehn, Vanessa, 2019. "Banks and corporate income taxation: A review," arqus Discussion Papers in Quantitative Tax Research 247, arqus - Arbeitskreis Quantitative Steuerlehre.
    5. Alejandro Pacheco & Chun-Hao Chang & Edward R. Lawrence, 2022. "Why do Subchapter S Banks Convert to C Banks?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 62(3), pages 143-161, December.
    6. Ajay Palvia & Emilia Vähämaa & Sami Vähämaa, 2015. "Are Female CEOs and Chairwomen More Conservative and Risk Averse? Evidence from the Banking Industry During the Financial Crisis," Journal of Business Ethics, Springer, vol. 131(3), pages 577-594, October.
    7. Pankaj Kumar Maskara & Emre Kuvvet & Gengxuan Chen, 2021. "The role of P2P platforms in enhancing financial inclusion in the United States: An analysis of peer‐to‐peer lending across the rural–urban divide," Financial Management, Financial Management Association International, vol. 50(3), pages 747-774, September.
    8. Russ Kashian & Richard G. Cummings & Peter Westort, 2017. "Equity and asset growth among Subchapter S banks," Applied Economics Letters, Taylor & Francis Journals, vol. 24(12), pages 854-857, July.

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