Bank differences in the coordination of regulatory capital, earnings, and taxes

Article Abstract:

The accounting, investing and financial decisions of banks are examined. The study focuses on how the banks' fluctuating levels of capital, earnings and taxes affect their decisions in seven capital-raising options. These options are security gains and losses, loan loss provisions, loan charge-offs, capital notes, common stock, preferred stock, and dividends. The study also investigates how responses to capital, earnings and tax pressures are affected by three individual bank characteristics: size, growth and profitability. Findings indicate that, even though they have common production functions, banks react differently to capital, earnings and tax incentives. It is also shown that banks vary systematically in capital, earnings and tax management. This indicates the segmentation of the banking sector in terms of size, growth and profitability.

Banking Institutions, Depository Credit Intermediation, DEPOSITORY INSTITUTIONS, Research, Banking industry, Banks (Finance), Bank management

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Foreign tax credit limitations and preferred stock issuances

Article Abstract:

The impact of the tax allocation rules in the Tax Reform Act of 1986 (TRA 86) on preferred stock issuances of US multinational firms was examined. Preferred stock issuances are the most likely debtlike financing instruments to be used by multinationals with excess foreign tax credits. The first sample of firms studied included 1989 Fortune 100 companies that were likely to be adversely affected by interest allocation and large excess foreign tax credits while the second sample surveyed included firms issuing significant amounts of preferred stock during the pre- and post-TRA 86 observation periods. Results showed that firms likely to be affected by the TRA 86 interest allocation rules did increase their issuances of preferred stock after the passage of the new tax rules.

United States, Management, Taxation, Foreign tax credit, Preferred stocks

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The effects of taxes, regulation, earnings, and organizational form on life insurers' investment portfolio realizations

Article Abstract:

Life insurers' investment portfolio returns and management strategy is found to be closely associated with capital regulation and earnings. Mutual insurers' capital gains realizations are also found to be closely related to company-specific equity tax rate variation particularly the Section 809 equity tax. Evidence also suggests differences between mutuals' and stocks' proclivities to use capital gains in earnings management.

Life Insurance, Direct Life Insurance Carriers, Analysis, Insurance industry, Portfolio management, Life insurance industry, Securities

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