The effects of corporate taxation on the cost of bank loans

Using a sample of 3,770 commercial banks in 167 countries over the years 2002–2021, we examine the effects of corporate taxation on loan prices. We find that banks perceive increased corporate taxation as a significant risk to borrowers and increase the cost of bank loans in response to increased corporate taxation. This is more pronounced for smaller banks, banks in low- and middle-income countries, and unlisted banks. Our findings indicate that policymakers should be aware of the adverse effects of increased corporate taxation on corporate external financing costs.