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on Accounting |
| By: | H. T.J. SMIT; W. A. VAN DEN BERG; W. DE MAESENEIRE |
| Abstract: | This paper uses a unified treatment of real options and game theory to examine the occurrence of bidding contests within a competitive environment of imperfect information and asymmetric bidders. Competing potential buyers may sequentially perform due diligence and incur costs (option premium) to become informed about their firm-specific target value (underlying value) before making a bid (exercise price). The first player’s bid reveals a signal on its own and the rival’s target value, thereby affecting the value of the rival’s option to bid on the target and the probability of a bidding contest. We find that bidding contests are more likely to take place between moderately correlated buyers, whereas rather diverse or just very similar buyers are less likely to compete. |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:05/289&r=acc |
| By: | Perroni, Carlo; Scharf, Kimberley Ann |
| Abstract: | Taxation is only sustainable if the general public complies with it. This observation is uncontroversial with tax practitioners but has been ignored by the public finance tradition, which has interpreted tax constitutions as binding contracts by which the power to tax is irretrievably conferred by individuals to government, which can then levy any tax it chooses. In the absence of an outside party enforcing contracts between members of a group, however, no arrangement within groups can be considered to be a binding contract, and therefore the power to tax must be sanctioned by individuals on an ongoing basis. In this Paper we offer, for the first time, a theoretical analysis of this fundamental compliance problem associated with taxation, obtaining predictions that in some cases point to a re-interpretation of the theoretical constructions of the public finance tradition while in others call them into question. |
| Keywords: | government; public goods; taxation |
| JEL: | H10 H20 H30 H40 |
| Date: | 2004–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4210&r=acc |
| By: | Jeanne, Olivier; Svensson, Lars E O |
| Abstract: | An independent central bank can manage its balance sheet and its capital so as to commit itself to a depreciation of its currency and an exchange-rate peg. This way, the central bank can implement the optimal escape from a liquidity trap, which involves a commitment to higher future inflation. This commitment mechanism works even though, realistically, the central bank cannot commit itself to a particular future money supply. It supports the feasibility of Svensson’s Foolproof Way to escape from a liquidity trap. |
| Keywords: | deflation; zero lower bound for interest rates |
| JEL: | E52 F31 F41 |
| Date: | 2004–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4599&r=acc |
| By: | Bayo-Moriones, Alberto; Galdón Sánchez, José Enrique; Güell, Maia |
| Abstract: | In this Paper we use data from industrial plants to investigate if seniority-based pay is used as a motivational device for production workers. Alternatively, seniority-based pay could simply be a wage-setting rule not necessarily related to the provision of incentives. Unlike previous papers, we use a direct measure of seniority-based pay as well as measures of monitoring devices and piece-rates. We find that firms that offer seniority-based pay are less likely to offer explicit incentives. They are also less likely to invest in monitoring devices. We also find that firms that offer seniority-based pay are more likely to engage in other human resource management policies that result in long employment relationships. Overall these results suggest that seniority-based pay is indeed used as a motivation device. |
| Keywords: | human resource management practices; incentives; M52; monitoring |
| JEL: | J30 M12 |
| Date: | 2004–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4606&r=acc |
| By: | Banerjee, Abhijit; Piketty, Thomas |
| Abstract: | This Paper presents data on the evolution of top incomes and wages from 1922 to 2000 in India using individual tax returns data. Our data shows that the shares of the top 0.01%, the top 0.1% and the top 1% in total income shrank substantially from the 1950s until the early-to-mid 1980s but then went back up again, so that today these shares are only slightly below what they were in the 1920s-1930s. We argue that this U-shaped pattern is broadly consistent with the evolution of economic policy in India: The period from the 1950s to the early-to-mid 1980s was also the period of ‘socialist’ policies in India, while the subsequent period, starting with the rise of Rajiv Gandhi, saw a gradual shift towards more pro-business policies. Although the initial share of this group was small, the fact that the rich were getting richer had a non-trivial impact on the overall income distribution. In particular, its impact is not large enough to fully explain the gap observed during the 1990s between average consumption growth in survey-based NSS data and the National accounts based NAS data, but is sufficiently large to explain a non-negligible part of it (between 20% and 40%). |
| Keywords: | income distribution |
| JEL: | J12 |
| Date: | 2004–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4632&r=acc |
| By: | Aron, Janine; Muellbauer, John |
| Abstract: | In common with many emerging market countries, South Africa’s government does not publish balance sheet wealth estimates on a market value basis, as produced in the US, UK, Japan, and elsewhere. Yet without information on the market values of liquid and illiquid personal sector wealth, it is difficult to explain aggregate consumer spending and saving, consumers’ demand for credit, and the broad money holdings of households. Behavioural equations for these variables are key components of central banks’ macro-econometric models, used in forecasting and policy-making. Understanding the domestic asset value channel of the monetary policy transmission mechanism is especially important for inflation targeting countries. We construct the first coherent set of aggregate, personal sector wealth estimates at market value for South Africa. Our quarterly estimates derive from published data on financial flows, and various other capital market data, often at book value. Our methods rely, where relevant, on accumulating flow of funds data using appropriate benchmarks, and, where necessary, converting book to market values using appropriate asset price indices. Relating asset to income ratios for various asset classes to asset price movements and rates of return, throws light on the changing composition of personal sector wealth. Most striking are the rise in pension wealth - overtaking gross housing assets in the late 1980s; the rise in household debt; and the relative decline of liquid and housing assets, from the early and mid-1980s, respectively. |
| Keywords: | C84; national balance sheets; personal sector wealth; saving |
| JEL: | E44 G11 |
| Date: | 2004–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4646&r=acc |
| By: | Evenett, Simon J; Hoekman, Bernard |
| Abstract: | The stalemate reached on launching negotiations on most of the Singapore Issues at Cancún provides an opportunity to revisit the knowledge base upon which proposals for international collective action may be drawn. This Paper examines the available evidence on public procurement practices in developing countries that could be relevant to multilateral rule making. Although there is considerable agreement on ends (efficient, non-corrupt, and transparent public purchasing systems), little information is available on means: effective and replicable strategies that developing countries have adopted to improve their public procurement systems. A concerted effort to substantially add to the knowledge base on public procurement reforms in developing countries, through targeted research and international exchange of information on applied procurement policies and outcomes, is critical to identify areas where binding multilateral disciplines may be beneficial. The literature surveyed in this Paper suggests that reforms of public procurement systems are often guided by international instruments and templates, but are not informed by quantitative assessments of the cross-country experience as regards the different options, mechanisms and technologies that can be adopted. A research agenda to help fill these lacunae is presented – implementation of which might inform a WTO-based effort to identify options for international cooperation. |
| Keywords: | Doha round; economic development; government procurement; WTO |
| JEL: | F13 H57 |
| Date: | 2004–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4663&r=acc |
| By: | Banerjee, Abhijit; Duflo, Esther |
| Abstract: | We begin the Paper by laying out a simple methodology that allows us to determine whether firms are credit constrained, based on how they react to changes in directed lending programs. The basic idea is that while both constrained and unconstrained firms may be willing to absorb all the directed credit that they can get (because it may be cheaper than other sources of credit), constrained firms will use it to expand production, while unconstrained firms will primarily use it as a substitute for other borrowing. We then apply this methodology to firms in India that became eligible for directed credit as a result of a policy change in 1998, and lost eligibility as a result of the reversal of this reform in 2000. Using firms that were already getting this kind of credit before 1998, and retained eligibility in 2000 to control for time trends, we show that there is no evidence that directed credit is being used as a substitute for other forms of credit. Instead the credit was used to finance more production – there was significant acceleration in the rate of growth of sales and profits for these firms. We conclude that many of the firms must have been severely credit constrained. |
| Keywords: | banking; credit constraints; India |
| JEL: | G20 O16 |
| Date: | 2004–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4681&r=acc |
| By: | Amiti, Mary; Wei, Shang-Jin |
| Abstract: | The recent media and political attention on service outsourcing from developed to developing countries gives the impression that outsourcing is exploding. As a result, workers in industrial countries are anxious about job losses. This Paper aims to establish what are the hypes and what are the facts. The results show that although service outsourcing has been steadily increasing it is still very low, and that in the United States and many other industrial countries ‘insourcing’ is greater than outsourcing. Using the United Kingdom as a case study, we find that job growth at a sectoral level is not negatively related to service outsourcing. |
| Keywords: | offshoring; outsourcing; services; trade |
| JEL: | F10 F20 |
| Date: | 2004–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4719&r=acc |
| By: | Crabbé, Karen; Janssen, Boudewijn; Vandenbussche, Hylke |
| Abstract: | This is the first Paper that looks at regional tax competition within one single country. In many countries in Europe, regions within a country differ substantially in their economic development and attractiveness to firms. Belgium is a typical example of a country where the economic situation of its three regions is very different. Our findings are indicative of regional tax competition, with a lower Effective Tax Rate (ETR) in the peripheral region of Wallonia than in Flanders. In addition to location variables, our empirical model explaining firm level heterogeneity in ETRs includes firm characteristics, sector membership and variables capturing statutory tax breaks. |
| Keywords: | Belgian firms; company accounts; effective tax rates |
| JEL: | C50 F36 H25 |
| Date: | 2004–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4721&r=acc |
| By: | Chetty, Raj; Saez, Emmanuel |
| Abstract: | This Paper analyses the effects of dividend taxation on corporate behaviour using the large tax cut on individual dividend income enacted in 2003. Using data spanning 1980 to 2004-Q2, we document a sharp and widespread surge in dividend payments following the tax cut, along several dimensions. First, an unprecedented number of firms initiated regular dividend payments after the reform. As a result, the number of publicly traded firms paying dividends, after having declined continuously for more than two decades, began to increase precisely in 2003. Second, many firms that were already paying dividends prior to the reform raised regular dividend payments significantly. Third, special dividends also rose. All of these effects are robust to introducing controls for profits and other firm characteristics. Additional evidence for specific groups of firms suggests that the tax cut induced increases in total payout rather than substitution between dividends and repurchases. The tax response was confined to firms with lower levels of forecasted growth, consistent with an improvement in capital allocation efficiency. The response to the tax cut was strongest in firms with strong principals whose tax incentives changed (presence of large taxable institutional owners or independent directors with large share holdings), and in firms where agents had stronger incentives to respond (large executive ownership and low levels of executive stock-options outstanding). These findings show that principal-agent issues play a central role in corporate responses to taxation. |
| Keywords: | corporate governance; dividend taxation |
| JEL: | G30 H30 |
| Date: | 2004–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4722&r=acc |
| By: | Lane, Philip R.; Milesi-Ferretti, Gian Maria |
| Abstract: | The founders of the Bretton Woods System sixty years ago were primarily concerned with orderly exchange rate adjustment in a world economy that was characterized by widespread restrictions on international capital mobility. In contrast, the rapid pace of financial globalization during recent years poses new challenges for the international monetary system. In particular, large gross cross-holdings of foreign assets and liabilities means that the valuation channel of exchange rate adjustment has grown in importance, relative to the traditional trade balance channel. Accordingly, this Paper empirically explores some of the inter-connections between financial globalization and exchange rate adjustment and discusses the policy implications. |
| Keywords: | capital flows; external assets and liabilities; financial integration |
| JEL: | F31 F32 |
| Date: | 2004–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4745&r=acc |
| By: | Axel, GAUTIER (CEREC, Facultés Universitaires Saint-Louis and CORE); Malika, HAMADI (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)) |
| Abstract: | In this paper, we raise the following two questions : (1) do Belgian holding companies operate an internal capital market to transfer financial resources in between their subsidiaries ? And if yes, (2) is the internal capital market efficient ? To answer the first question, we check if the group cash flow is a determinant of the investment’s spending of group members. The answer is positive if the holding’s subsidiary is affilliated to a coordinate center and negative otherwise. To answer the second question, we evaluate if internal transfers are driven by efficiency. From our estimations, we cannot conclude that Belgian Holding companies have an efficient internal capital market. |
| Keywords: | Investment; Holding; Internal capital market |
| JEL: | G31 |
| Date: | 2005–01–04 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2004037&r=acc |
| By: | Dani?evsk?, P.; Jong, A. de; Verbeek, M. (Erasmus Research Institute of Management (ERIM), Erasmus University Rotterdam) |
| Abstract: | This paper investigates three capital structure decisions ? leverage, debt maturity and the source of debt ? in a simultaneous setting. Moreover, we investigate whether these choices are influenced by the involvement of banks in a firm. Our results based on a panel of Dutch firms show that bank relationships, measured by interlocking board memberships and equity ownership, have a significant impact on the relations among the three capital structure choices. First, less bank involvement strengthens the positive impact of leverage on maturity. This is consistent with the liquidity risk theory, because involved banks help firms to mitigate liquidity risk. Second, bank debt negatively effects leverage in firms with bank interlocks, while this relation is absent in firms without such bank involvement. This result suggests that banks maximize the value of their loans by reducing overall leverage. Third, we find a strong trade-off between bank debt and maturity, which is independent of the degree of bank involvement. |
| Keywords: | capital structure;debt maturity;bank relationships;international economics;financial economics;source of debt; |
| Date: | 2004–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:eureri:30001462&r=acc |
| By: | Klaus Fischer; Nabil Khoury |
| Abstract: | One approach that is gaining in popularity among portfolio managers uses ethical ratings, published by specialized research organizations, to screen securities for portfolio selection. Portfolio managers can thus gain a better understanding of the phenomenon and adopt a better and more consistent approach to ethical investment. By the same token, board of directors can measure the impact of their ethical policies on the market performance of the stock of their company. This paper provides new evidence about the impact of ethical ratings published in Canada on the risk-adjusted returns of the securities concerned, within the framework of a multi-factor Capital Asset Pricing Model, and gives an interpretation of the results from the perspective of portfolio composition and of corporate governance. |
| Keywords: | Ethical Ratings and Security Performance |
| JEL: | G11 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:0501&r=acc |
| By: | Karen Wilson |
| Abstract: | This paper summarizes the characteristics of the System of National Accounts as outlined in SNA93. It outlines the elements of infrastructure used to build the accounts and then describes the flow of accounts and supply and use framework used to construct integrated macro economic statistics. Three countries are then compared in the use of this standard; Australia, Canada and the United Kingdom. Each of the three countries uses the Supply and Use framework (variant of Input Output tables) as the key integrating tool for building the system of accounts and GDP benchmarks are determined using the "production" approach inherent in the Supply and Use framework. In Australia and United Kingdom, the supply and use framework is used to balance and benchmark the flow of accounts up to and including the measures of net lending/borrowing across the institutional sectors of the economy. In Canada the supply and use framework is used to determine the level of GDP but not all of the components of the flow of accounts are benchmarked to it, leaving statistical discrepancies between incomes and final expenditures and net lending/borrowing across sectors. This allows Canada to track the statistical system which provides independent estimates form establishment or kind of activity unit data (industry statistics) and institutional unit (savings and investment decision unit -- enterprise in the case of businesses) data used to build accounts by institutional sector. In particular, it allows coherence and coverage analysis of the data system. In all three countries, the financial accounts and balance sheets are integrated with the flow of accounts. Statistical discrepancies are shown in all countries between net lending/borrowing and net financial investment by institutional sector. None of the three countries publishes regular "other volume changes in assets" accounts although all recognize it as a part of the system which is more and more important to explaining wealth changes. Finally the paper ends with some summary comparisons of the three countries' systems of accounts and recognizes that while they all follow international standards to high degree, differences still exist which may or may not effect international comparability. International coordination is the key to making the standard meet this purpose. The United Kingdom system, as an example of the European system, best meets the standard for international comparison purposes. |
| JEL: | C82 E20 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11106&r=acc |
| By: | Breugelmans E.; Campo K.; Gijsbrechts E. |
| Abstract: | This paper investigates the impact of an online retailer’s stock-out policy on purchase incidence and choice. We make a distinction between three policies: (1) stock-outs are immediately visible and there are no suggestions, (2) stock-outs are only visible after clicking and (3) a replacement item is suggested for each stock-out product. Results from an extensive and realistic online grocery shopping experiment reveal that the adopted stock-out policy has a significant impact on both decisions. First, making stock-outs not immediately visible creates confusion and intensifies the consumer’s loss experience, thereby reducing the tendency to buy in the category. Second, while suggesting a replacement item normally leads to a substantial increase in the item’s choice probability, this effect is canceled out when higher-priced – suspicious – items are suggested. Overall, these results indicate that retailers have an interest in pursuing open and convenience-oriented stock-out policies. |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:ant:wpaper:2005005&r=acc |