The effects of state tax and regulatory policies on the location of re
al, financial, and portfolio choice activity of banks are investigated
The results show that banks have increased their efforts to avoid tax
and regulatory policies since the 1980 Depository Institutions Deregu
lation and Monetary Control Act. Delaware and South Dakota have been v
ery effective in designing policies to attract banking, but they appea
r to have benefited from first-mover advantages. Overall, the effects
of taxes and regulations remain small, probably because the regulatory
and technological environments have only recently become conducive to
interstate tax-avoidance behavior