Note(s): The table exhibits the marginal impact of the Dodd–Frank stress tests for banks with a Post-DFA increase in tax avoidance post-Dodd–Frank compared to the pre-Dodd Frank period on risk ratios, bank loans and balance sheet items. The portfolio characteristic variables are scaled by total assets. The risk ratios in Panel A include Risk Density (risk-weighted assets/assets), Capital Ratio, Tier 1 Ratio, Leverage Ratio and Panel B shows the impact on risk weight asset categories (100%, 50%, 20% and 0% Risk Weights) over total assets. Panel C shows the marginal impact of stress tests when interacted with a large increase in tax avoidance in the Dodd–Frank era on Total Loans, Commercial and Residential Real Estate Loans, Commercial and Industrial (C&I) Loans and Consumer loans over total assets. Finally, Panel D shows the portfolio characteristics such as Off Balance Sheet Assets, Held for Sale Loans, Available for Sale Securities, Held to Maturity Securities, Cash and Deposits Due and Federal Funds. The portfolio characteristic variables are scaled by total assets. Post-DFA Intensity in Tax Avoidance is a dummy variable equal to 1 for categories of large banks and regional banks in the top tercile increase in tax avoidance activities in the post-implementation of Dodd–Frank period (2011–2016) compared to the years 2005–2010. StressTest is a dummy variable equal to 1 for CCAR stress test banks and zero for Non-CCAR stress test banks. Control variables include the first 12 bank characteristics shown in Table 2. Bank and year-fixed effects are included in the regressions. Standard errors are clustered at the bank level and are reported in parentheses. ***, ** and * indicate significance at the 1%, 5% and 10% levels, respectively

Source(s): Authors’ own work