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The Resource Measuring Commercial Bank Profitability: Proceed With Caution

Measuring Commercial Bank Profitability: Proceed With Caution

Label
Measuring Commercial Bank Profitability: Proceed With Caution
Title
Measuring Commercial Bank Profitability: Proceed With Caution
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Summary
The federal tax code creates challenges for comparing the profit rates of different banks on a consistent basis. The earnings of banks that elect to operate under subchapter S of the federal tax code are not subject to federal corporate income tax, but shareholders of these "S-banks" are taxed on their pro rata share of the entire earnings of the bank. The number of banks electing subchapter S tax treatment has increased rapidly, especially among small banks. The authors use estimates of the federal corporate income tax that S-banks would pay if they were subject to the tax to show that the difference in the tax treatment of S-banks and other banks has a large impact on measures of United States banking system profitability. Further, the article shows that adjustment of S-bank earnings by estimates of federal income taxes to make them comparable with the earnings of other banks can markedly affect conclusions of studies that use net income as a measure of performance. Finally, the article shows that S-banks (even after their earnings are reduced by estimated federal taxes) tend to out-earn their peers. S-banks also tend to have higher earnings rates than their peers in the year before they elect S-bank status
http://library.link/vocab/creatorName
  • Gilbert, R. Alton
  • Inter-university Consortium for Political and Social Research [distributor]
http://library.link/vocab/relatedWorkOrContributorName
Wheelock, David C.
Label
Measuring Commercial Bank Profitability: Proceed With Caution
Instantiates
Publication
Note
21301
Control code
ICPSR21301.v1
Governing access note
Access restricted to subscribing institutions
Label
Measuring Commercial Bank Profitability: Proceed With Caution
Publication
Note
21301
Control code
ICPSR21301.v1
Governing access note
Access restricted to subscribing institutions

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