Halle Institute for Economic Research
5th Finance and Productivity (FINPRO) Conference, Tokyo FINPRO5, co-organised by the IMF, the University of Tokyo (CARF), IWH-CompNet, the University of Amsterdam and CEPR, will…
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Media Response
Media Response March 2026 Reint Gropp: Interview zu Teilzeit-Arbeit in: MDR Jump, 10.03.2026 Steffen Müller: Zahl der Firmeninsolvenzen steigt im Februar auf 1466 Fälle und liegt…
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Centre for Business and Productivity Dynamics
Centre for Business and Productivity Dynamics (IWH-CBPD) The Centre for Business and Productivity Dynamics (CBPD) was founded in January 2025 and works with policy and research…
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Research Articles
Research Articles Explore cutting-edge research based on CompNet’s micro-aggregated firm-level data and related analytical tools. These articles cover empirical and theoretical…
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IWH-DPE in a Nutshell
IWH-DPE in a Nutshell The IWH Doctoral Programme in Economics (IWH-DPE) is the unit that organises the education of doctoral students at the IWH in close cooperation with partner…
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Centre for Evidence-based Policy Advice
Centre for Evidence-based Policy Advice (IWH-CEP) The Centre for Evidence-based Policy Advice (IWH-CEP) of the IWH was founded in 2014. It is a platform that bundles and…
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Nothing Special about an Allowance for Corporate Equity: Evidence from Italian Banks
Dennis Dreusch, Felix Noth, Peter Reichling
Journal of International Money and Finance,
Vol. 150 (February),
2025
Abstract
This paper analyzes the impact of reduced tax incentives for equity financing on banks' regulatory capital ratios under the Basel III regime. We are particularly interested in a recent interest rate cut in the Italian corporate equity allowance, which reduces the relative tax advantage of equity financing. The results show that banks respond to this increased tax disparity by significantly reducing their regulatory capital while at the same time reducing their risk-taking. The decline in capital is more pronounced for small banks and outweighs the initial capital gains from the introduction of this tax instrument. Our results challenge the use of equity allowances, in that financial stability gains persist only as long as costly tax subsidies remain intact and diminish as the size of the subsidy is reduced.
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Research Data Centre
Research Data Centre (IWH-RDC) Direct link to our Data Offer The IWH Research Data Centre offers external researchers access to microdata and micro-aggregated data sets that…
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Research Clusters
Three Research Clusters Each IWH research group is assigned to a topic-oriented research cluster. The clusters are not separate organisational units, but rather bundle the…
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Alumni
IWH Alumni The IWH maintains contact with its former employees worldwide. We involve our alumni in our work and keep them informed, for example, with a newsletter. We also plan…
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