Note(s): The table below 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 profitability, Cost of Capital and restatements and advisory-related fees. The profitability measures in Panel A include Tobin’s Q, gross profitability, Return on Equity, Return on Assets, Net Interest Margin and Net Non-Interest Margin. Panel B reports our findings for Cost of Capital-cost of debt and equity and the Dividend Payout Ratio. Finally, Panel C displays the marginal impact of stress tests over a large increase in tax avoidance in the Dodd–Frank era on bank reporting quality (restatements), Accounting and Auditing Expenses, Legal Expenses, Consulting and Advisory Expenses. 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