The Simultaneity of Decisions on the Tax and Non-Tax Cost Tradeoff in the Korean Banking Industry

• 영문명: 한국 은행산업에서의 세금 및 비세금 비용 상충에 따른 의사결정의 동시성
• 발행기관: 한국전산회계학회
• 저자명: 정운오 박성욱
• 간행물 정보: 『한국전산회계학회 학술대회 논문집』2009년 춘계학술대회 발표집, 137~160쪽, 전체 24쪽
• 주제분류: 경제경영 > 회계학
• 파일형태: PDF
• 발행일자: 2009.06.30

영문 초록

We investigate whether Korean bank managers consider the tax, regulatory, and financial reporting costs of their decisions concurrently. We specifically concentrate on four decision items that bank managers often employ in achieving their tax, regulatory, and/or financial reporting objectives; actual write-offs, loan loss provisions, security gains, and external funding. Unlike in the most prior research in this area in which only one of these four decision items is individually investigated, we examine all of the four items simultaneously because in reality bank managers would consider these items as a portfolio of decision variables. Our research interest lies in the issue of whether the Korean bank managers attempt to trade off tax costs against non-tax costs (i.e., regulatory and financial reporting costs). To test this, we extract a sample of 534 firm-years from the period of 2001-2006 and analyze these data by using ordinary least squares (OLS) regressions first and then by employing a set of simultaneous equations to factor into the potential simultaneity of the four decision variables. The main discovery of our study is as follows: First, we find that the banks with relatively high tax costs take larger write-offs and loan loss provisions to reduce their tax liability. Second, with regard to regulatory costs, banks increase their Bank for International Settlement (BIS) capital ratios by taking more write-offs, securities gains, and external funding, but fewer provisions. Furthermore, the banks with high financial reporting costs reduce their loan loss provisions to report higher earnings. Finally, with respect to the tradeoffs between tax and non-tax costs, the banks facing high financial reporting costs tend to decrease their loan loss provisions to increase reported earnings, thus forgoing tax savings. The commercial banks with high financial reporting costs are also likely to increase security gains to boost their reported earnings. However, we are unable to find any significant trade-off effect between tax and regulatory costs.

목차

Ⅰ. Introduction

Ⅱ. Related Research

Ⅲ. BIS Capital Ratios

Ⅳ. Hypotheses

Ⅴ. Research Design

Ⅵ. Results

Ⅶ. Summary

REFERENCES

키워드

Tax costs Regulatory costs Financial reporting costs Banking industry Simultaneous equation