Banking Market Consolidation and Tax Planning Intermediation: Evidence from Client Firm Tax Haven Operations

Jeong-Bon KIM; Yupeng LIN; Ying MAO; Zheng WANG

doi:10.2308/tar-2019-0243

Banking Market Consolidation and Tax Planning Intermediation: Evidence from Client Firm Tax Haven Operations

Jeong-Bon KIM^*, Yupeng LIN, Ying MAO, Zheng WANG

^*Corresponding author for this work

Lingnan University

Research output: Journal Publications › Journal Article (refereed) › peer-review

2 Citations (Scopus)

Abstract

This study examines the effect of banking market consolidations via mergers and acquisitions (M&As) on the role of banks in intermediating corporate tax planning through offshore tax haven operations. We find that bank clients significantly increase their tax haven operations after their banks are merged with others. In addition, such an increase is greater when a commercial bank merges with an investment bank and when the clients have greater tax planning opportunities. We also employ network analyses to show that the propensity for a client to expand its operations into a new tax haven country increases significantly when its relationship bank enters into this country through an M&A. Collectively, our findings reveal that bank M&As enhance banks’ tax intermediation capability.

Original language	English
Pages (from-to)	217-245
Number of pages	29
Journal	The Accounting Review
Volume	98
Issue number	4
Early online date	25 Oct 2022
DOIs	https://doi.org/10.2308/tar-2019-0243
Publication status	Published - 1 Jul 2023

Bibliographical note

Funding Information:
We appreciate helpful comments from Lillian F. Mills (editor), two anonymous reviewers, Sati Bandyopadhyay, Wenxia Ge, Tiemei Li, Sharon Katz, Duane Kennedy, Byron Song, Haibin Wu, Yangxin Yu, Liandong Zhang, and participants of research workshops at the City University of Hong Kong, Fudan University, Lingnan University, National University of Singapore (NUS) Business School, Sun Yat-sen University, the University of Waterloo, and the 2019 42nd Annual Conference of the Canadian Academic Accounting Association (CAAA). Special thanks go to Anand Srinivasan, who shared the bank M&A data with us. Yupeng Lin acknowledges research support from the National University of Singapore and Ministry of Education (MOE) Tier 1 Grant (Grant R-521-000-044-115).

Publisher Copyright:
© 2023 American Accounting Association. All rights reserved.

Keywords

Tax haven
tax avoidance
banking market consolidation
tax planning intermediation
tax haven

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10.2308/tar-2019-0243

Cite this

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abstract = "This study examines the effect of banking market consolidations via mergers and acquisitions (M&As) on the role of banks in intermediating corporate tax planning through offshore tax haven operations. We find that bank clients significantly increase their tax haven operations after their banks are merged with others. In addition, such an increase is greater when a commercial bank merges with an investment bank and when the clients have greater tax planning opportunities. We also employ network analyses to show that the propensity for a client to expand its operations into a new tax haven country increases significantly when its relationship bank enters into this country through an M&A. Collectively, our findings reveal that bank M&As enhance banks{\textquoteright} tax intermediation capability.",

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N2 - This study examines the effect of banking market consolidations via mergers and acquisitions (M&As) on the role of banks in intermediating corporate tax planning through offshore tax haven operations. We find that bank clients significantly increase their tax haven operations after their banks are merged with others. In addition, such an increase is greater when a commercial bank merges with an investment bank and when the clients have greater tax planning opportunities. We also employ network analyses to show that the propensity for a client to expand its operations into a new tax haven country increases significantly when its relationship bank enters into this country through an M&A. Collectively, our findings reveal that bank M&As enhance banks’ tax intermediation capability.

AB - This study examines the effect of banking market consolidations via mergers and acquisitions (M&As) on the role of banks in intermediating corporate tax planning through offshore tax haven operations. We find that bank clients significantly increase their tax haven operations after their banks are merged with others. In addition, such an increase is greater when a commercial bank merges with an investment bank and when the clients have greater tax planning opportunities. We also employ network analyses to show that the propensity for a client to expand its operations into a new tax haven country increases significantly when its relationship bank enters into this country through an M&A. Collectively, our findings reveal that bank M&As enhance banks’ tax intermediation capability.

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Banking Market Consolidation and Tax Planning Intermediation: Evidence from Client Firm Tax Haven Operations

Abstract

Bibliographical note

Keywords

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