Essays on the taxation and regulation of financial markets

This thesis is a collection of three essays analyzing the economic effects of taxation, market structure, and the regulatory environment on financial markets, focusing in particular on financial intermediaries such as banks and mutual funds. The first chapter uses the unprecedented changes in the degree of competition in local banking markets that occurred between 1980 and 1994 to estimate the impact of market competition on the risk profile of commercial bank lending. There is evidence that increasing bank market power has been associated with reductions in the flow of bank capital to construction and land development loans, which are the highest-risk category of commercial bank loans. The magnitude of this effect is large: an increase in market concentration from the 25th to the 75th percentile is associated with a 20 percent drop in the share of bank lending going to construction loans. Robustness to a variety of control and instrumental variables strategies supports a causal interpretation of this empirical relationship. The second chapter focuses again on the role of market structure in commercial banking markets, this time focusing on the relationship between market structure and consumer borrowing. This chapter uses data from the 1983 Survey of Consumer Finances to test empirically the relationship between banking market concentration and households' self-reported measures of credit rationing and constraint. There is strong evidence that more concentrated markets have fewer constrained borrowers, a result consistent with the Petersen-Rajan (1995) model of credit markets. The third chapter, co-authored with Professor James Poterba, explores the relationship between the after-tax returns that taxable investors earn on equity mutual funds and the subsequent cash inflows to these funds.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Economics.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2002

Author dc:creator

• Bergstresser, Daniel

Advisor dc:contributor.advisor

• James M. Poterba.

• Economics.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/8407

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/8407