The changing role of commercial banks in the municipal securities market.: An article from: Journal of Money, Credit & Banking
Book Details
PublisherOhio State University Press
ISBN / ASINB00093MXJO
ISBN-13978B00093MXJ2
MarketplaceFrance 🇫🇷
Description
This digital document is an article from Journal of Money, Credit & Banking, published by Ohio State University Press on August 1, 1995. The length of the article is 5550 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.
From the supplier: The tax treatment of commercial banks as investors in municipal securities changed dramatically with the loss of interest expense deductibility for municipal carrying costs under the Tax Reform Act of 1986. Competing theories of relative yield determination suggest that the lost deductions and recent reductions in corporate and personal tax rates should have different effects on the ratio of municipal to taxable yields. This study examines the empirical implications of these tax changes using time series for the period 1966-1992. Results suggest that the yield ratio varied inversely with relative bank purchases of municipals through mid-year 1986. After 1986, however, increased bank municipal purchases no longer directly lowered municipal yields. The yield ratio also varied inversely with changes in personal tax rates throughout the sample period, and increased after 1986 when banks lost 100 percent of their interest deduction for municipal carrying costs. Changes in corporate tax rates apparently play little role in shaping relative yields. (Printed by permission of the publisher.)
Citation Details
Title: The changing role of commercial banks in the municipal securities market.
Author: Scott E. Hein
Publication:Journal of Money, Credit & Banking (Refereed)
Date: August 1, 1995
Publisher: Ohio State University Press
Volume: v27 Issue: n3 Page: p894(13)
Distributed by Thomson Gale
From the supplier: The tax treatment of commercial banks as investors in municipal securities changed dramatically with the loss of interest expense deductibility for municipal carrying costs under the Tax Reform Act of 1986. Competing theories of relative yield determination suggest that the lost deductions and recent reductions in corporate and personal tax rates should have different effects on the ratio of municipal to taxable yields. This study examines the empirical implications of these tax changes using time series for the period 1966-1992. Results suggest that the yield ratio varied inversely with relative bank purchases of municipals through mid-year 1986. After 1986, however, increased bank municipal purchases no longer directly lowered municipal yields. The yield ratio also varied inversely with changes in personal tax rates throughout the sample period, and increased after 1986 when banks lost 100 percent of their interest deduction for municipal carrying costs. Changes in corporate tax rates apparently play little role in shaping relative yields. (Printed by permission of the publisher.)
Citation Details
Title: The changing role of commercial banks in the municipal securities market.
Author: Scott E. Hein
Publication:Journal of Money, Credit & Banking (Refereed)
Date: August 1, 1995
Publisher: Ohio State University Press
Volume: v27 Issue: n3 Page: p894(13)
Distributed by Thomson Gale
