Implications of Introducing U.S. Withholding Taxes on Foreigners' Interest Income

SYNOPSIS A potentially important form of financial information disaggregation is to segregate the change in an income measure into its underlying performance drivers. In this study, we perform a comprehensive analysis of the usefulness of such disaggregation to investors. We utilize the volume and rate analysis in banks' 10-K filings, in which banks disaggregate annual changes in net interest income into changes in the balances (“volume variance”) and changes in the rates (“rate variance”) of assets and liabilities. We document that volume and rate variances are associated with bank characteristics, including market power, funding sources, and credit risk. We find volume and rate variances are predictive of future net interest income and are positively associated with stock returns and prices, suggesting the disaggregated information is value relevant. Our study informs regulators and users by showing that disaggregated information along volume and rate dimensions has predictive and confirmatory value.

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Internal Control Quality and Bank Risk-Taking and Performance

Auditing A Journal of Practice & Theory ◽

10.2308/ajpt-19-037 ◽

2020 ◽

Author(s):

Matthew Baugh ◽

Matthew Ege ◽

Christopher G. Yust

Keyword(s):

Internal Control ◽

Risk Taking ◽

Downside Risk ◽

Internal Controls ◽

Bank Risk ◽

Material Weakness ◽

Control Quality ◽

Interest Income ◽

Upside Risk ◽

And Performance

Using a sample of bank-years from 2005 to 2017, we examine the effect of internal control quality on future risk-taking and performance. We find that banks that disclose a material weakness in internal controls have higher risk-taking and worse performance in the future, including having a higher (lower) likelihood of experiencing large losses (gains). These findings suggest that weak controls increase (reduce) downside (upside) risk-taking or conversely that strong controls increase (reduce) upside (downside) risk-taking. Path analyses suggest that 22.3 to 43.7 percent of the effect of internal control quality on future performance is through risk-taking. Additionally, material weaknesses are negatively associated with total asset, loan, interest income, and non-interest income growth, suggesting that internal control quality affects both core and non-core activities of banks. Overall, results suggest that strong internal controls improve bank risk-taking, in part through asymmetrically reducing downside risk-taking while facilitating upside risk-taking, ultimately improving bank performance.

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SHORT AND LONG RUN EFFECTS OF INTEREST-INCOME AND ESTATE TAXES

Metroeconomica ◽

10.1111/j.1467-999x.1974.tb00339.x ◽

1974 ◽

Vol 26 (1-3) ◽

pp. 109-129 ◽

Cited By ~ 1

Author(s):

Eytan Sheshinski

Keyword(s):

Interest Income ◽

Long Run ◽

Estate Taxes

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On The Contribution of Interest Expense (Income) on Total Output

Open Economics ◽

10.1515/openec-2020-0112 ◽

2021 ◽

Vol 4 (1) ◽

pp. 31-56

Author(s):

Ahmed Mehedi Nizam

Keyword(s):

Interest Rate ◽

Aggregate Demand ◽

Total Output ◽

Response Analysis ◽

Panel Var ◽

Intuitive Reasoning ◽

Body Of Knowledge ◽

Interest Income ◽

Structural Panel ◽

The Impact

Abstract A decrease in interest rate in traditional view of monetary policy transmission is linked to a lower cost of borrowing which eventually results into a greater spending in investment and a bigger GDP. However, a decrease in interest rate is also linked to a decrease in interest income which, in turn, affects the aggregate demand and total GDP. So far, no concerted effort has been made to investigate this positive inter-relation between interest income and GDP in the existing literature. Here in the first place we intuitively describe the inter-relation between interest income and output and then provide a micro-foundation of our intuitive reasoning in the context of a small endowment economy with finitely-lived identical households. Then we try to uncover the impact of nominal interest income on the macroeconomy using multiplier theory for a panel of some 04 (four) OECD countries. We define and calculate the corresponding multiplier values algebraically and then we empirically measure them using impulse response analysis under structural panel VAR framework. Large, consistent and positive values of the cumulative multipliers indicate a stable positive relationship between nominal interest income and output. Moreover, variance decomposition of GDP shows that a significant portion of the variance in GDP is attributed to interest income under VAR/VECM framework. Finally, we have shown how and where our analysis fits into the existing body of knowledge.

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