nep-acc New Economics Papers
on Accounting
Issue of 2005‒05‒07
seventeen papers chosen by
Bernardo Batiz-Lazo
London South Bank University

  1. Royal Ahold: a failure of corporate governance and an accounting scandal By Jong,Abe de; DeJong,Douglas V.; Mertens,Gerard
  2. Knowledge and Preference in Reporting Financial Information By Honggao Cao; Daniel H. Hill
  3. Fifty years of Research on Accuracy of Capital Expenditure Project Estimates: A Review of the Findings and their Validity. By Stefan Linder
  5. Governance and Performance: Theory-Based Evidence from US Coast Guard Inspections By maurice moffett; alok k. bohara; kishore gawande
  6. Effects of culture on tax compliance: A cross check of experimental and survey evidence By Ronald G. Cummings; Jorge Martinez-Vazquez; Michael McKee; Benno Torgler
  7. Making Fiscal Decentralization Work in Vietnam By Jorge Martinez-Vazquez
  8. Societal Institutions and Tax Effort in Developing Countries By Richard M. Bird; Jorge Martinez-Vazquez; Benno Torgler
  9. The Land Value Tax in Jamaica:An Analysis and Options for Reform By David L. Sjoquist
  10. Property Transfer Tax and Stamp Duty By Roy Bahl
  11. The Jamaican Individual Income Tax By Sally Wallace; James Alm
  12. Payroll Taxes and Contributions By James Alm; Sally Wallace
  13. Tax Burden in Jamaica By Dillon Alleyne; James Alm; Roy Bahl; Sally Wallace
  14. Corporate Income Tax and Tax Incentives By Mark Rider
  15. How do Multinationals Build Social Capital? Diageo's Corporate Citizenship Programme. By David Bek; Ian W Jones; Michael J Pollitt
  16. Corporate governance convergence: evidence from takeover regulation reforms in Europe By Goergen,Marc; Martynova,Martina; Renneboog,Luc
  17. Untangling the Quality of Governance from the Level of Income: Are Sub-Saharan African Countries Governed Well? By Erich Gundlach; Susanne Hartmann

  1. By: Jong,Abe de; DeJong,Douglas V.; Mertens,Gerard (Tilburg University, Center for Economic Research)
    Abstract: Royal Ahold (Koninklijke Ahold NV) was one of the major success stories in the 1990s and is one of the major failures, suffering a complete meltdown, in 2003. We investigate the strategy, accounting transparency and corporate governance of Ahold; elements which jointly drive the firm s performance over this period of time. In general, the corporate governance, accounting transparency, strategy and firm performance relationships are complex. There is not a fully specified model available to address the inter-relationships, including the endogeneity problem. The econometrics are difficult and constrained not only by the lack of a fully specified theory but also by data availability. Our clinical study overcomes these problems by providing an in-depth analysis of the inter-relationships among corporate governance, accounting transparency and strategy that lead to Ahold s downfall. We provide insights into these relationships and their complexity that present theory and empirical studies cannot address.
    JEL: F36 G38 K22 M40
    Date: 2005
  2. By: Honggao Cao (University of Michigan); Daniel H. Hill (University of Michigan)
    Abstract: This article models respondent behavior in a financial survey with a framework explicitly integrating a respondent’s knowledge of and willingness to reveal his or her financial status. Whether a respondent provides a valid answer, a “don’t know”, or a “refusal” to a financial question depends on the interaction of his or her financial knowledge and preferences regarding revealing the knowledge. Using asset response and nonresponse data from the Health and Retirement Study (2000), we found that knowledge and preferences play interrelated roles in reporting financial information, that a respondent’s age, gender, education, and race and ethnicity are important predictors of respondent behavior, and that race and ethnicity affect a respondent behavior only via their influence on preferences, while gender only via its influence on knowledge. We also found strong heterogeneity in respondents’ financial knowledge and their willingness to reveal the knowledge.
    Date: 2005–03
  3. By: Stefan Linder (WHU, Vallendar Germany)
    Abstract: Capital budgeting research has traditionally focused on ever improving the methods used for evaluating projects. Since it seems futile to use sophisticated evaluation techniques if their input data – that is, estimates of cash inflows and outflows – are of inferior quality, it is justifiable to call this focus into question by exploring forecasting accuracy. In order to do so, the article analyzes the empirical findings on estimation error gathered in 35 studies published between 1954 and 2002. As the review shows, over-optimism seems to be a relevant problem in capital expenditure project forecasting. This calls the traditional research focus into question. More research effort targeted at the misestimation bias in capital budgeting and at ways to improve forecasting accuracy seems necessary.
    Keywords: Capital budgeting, Capital Expenditures, Estimation Accuracy, Forecasting, Post-Audit.
    JEL: G
    Date: 2005–04–30
  4. By: Maurizio Canavari (Alma Mater Studiorum-Università di Bologna); Rino GHELFI (Alma Mater Studiorum-Università di Bologna); Maurizio MERLO (Università di Padova); Sergio RIVAROLI (Alma Mater Studiorum-Università di Bologna); Danio SARTI (Consiglio Nazionale delle Ricerche)
    Abstract: The latest orientations of the CAP have had remarkable and wide-spread effects on the whole agri-food sector. It has deeply influenced the entrepreneurs' choices, with reference both to the production techniques and to the business organization. The changes have had inevitable reflexes on the economic results of the firms, thus determining adaptations regarding both the structure and the amount of inputs. In this paper, an analysis of the book-keeping results of agricultural enterprises of Northern and Central Italy is carried out. We try to underline and analyze the evolution of the economic results and the main structural and organizational elements in the firms. The accountancy data of a group of firms located in the Veneto, Emilia-Romagna and Tuscany regions, referred to the period 1994-2000, are taken into consideration. These firms seems to adequately represent the main type of farming: field crops, fruit-growing, wine-growing, husbandry. The study is aimed at underlining the influence of the EU payments on the profitability and the changes in the value distribution between the various input suppliers.
    JEL: P Q Z
    Date: 2005–05–03
  5. By: maurice moffett (baylor college of medicine); alok k. bohara (u. new mexico); kishore gawande (texas a&m u.)
    Abstract: Given three stylized facts about the US Coast Guard (USCG), namely, soft penalties for safety violations, low incidence of penalties relative to the number of violations, and substantial resources devoted to inspections of vessels, this paper seeks (i) a theoretical lens to view USCG activities and (ii) an empirical assessment of whether those activities improve performance. Harrington’s (1988) model is motivated by these stylized facts about US regulation in general, and provides a solution via targeting of good and poor performers. The model generates hypotheses about optimal regulation in the context of pollution prevention activities of the USCG. An organization-level panel data set consisting of thousands of US flag tank barges is constructed to test those hypotheses. A count model that controls for vessel heterogeneity yields mixed evidence. If USCG inspections are considered exogenous variables (as the theory presumes), they appear to prevent pollution spills. But if inspections are endogenous and respond to previous spills then correcting for endogeneity reverses the earlier result. In addition, violations are found to be good predictors of pollution occurrences, suggesting that inspections are not as effective as they could be. Targeting as in Harrington’s model therefore appears to be incomplete, and the findings suggest that more complete targeting could increase performance. An interesting finding is that stronger penalties could increase performance.
    Keywords: Harrington model; Inspections; Penalties; Oil Spills; USCG;
    JEL: D6 D7 H
    Date: 2005–05–03
  6. By: Ronald G. Cummings; Jorge Martinez-Vazquez (Andrew Young School of Policy Studies, Georgia State University); Michael McKee; Benno Torgler
    Abstract: There is considerable evidence that enforcement efforts can increase tax compliance. However, there must be other forces at work because observed compliance levels cannot be fully explained by the level of enforcement actions typical of most tax authorities. Further, there are observed differences, not related to enforcement effort, in the levels of compliance across countries and cultures. To fully understand differences in compliance behavior across cultures one needs to understand differences in tax administration and citizen attitudes toward governments. The working hypothesis is that cross-cultural differences in behavior have foundations in these institutions. Tax compliance is a complex behavioral issue and its investigation requires the use of a variety of methods and data sources. Results from laboratory experiments conducted in different countries demonstrate that observed differences in tax compliance levels can be explained by differences in the fairness of tax administration, in the perceived fiscal exchange, and in the overall attitude towards the respective governments. These experimental results are shown to be robust by replicating them for the same countries using survey response measures of “tax morale.”
    Keywords: tax compliance, tax morale, tax authorities
    Date: 2004–08–01
  7. By: Jorge Martinez-Vazquez (Andrew Young School of Policy Studies, Georgia State University)
    Abstract: Vietnam is a poor country with large and increasing needs in infrastructure, education, health, and other areas of the public sector. The current policy of the Government of Vietnam (GOV) is not to increase tax effort, but actually to reduce it. Recently, the GOV has cut the rates of several taxes with the goal of making Vietnam’s exports more competitive internationally and to attract more foreign direct investment. Tax revenues will be further cut in the near future as the GOV prepares for accession to the WTO by reducing the level and dispersion of customs tariff rates.
    Keywords: Fiscal Decentralization,Vietnam, tax effort
    Date: 2004–08–01
  8. By: Richard M. Bird (Director of the International Tax Program, Joseph L. Rotman School of Management, University of Toronto); Jorge Martinez-Vazquez (Andrew Young School of Policy Studies, Georgia State University); Benno Torgler
    Abstract: “Will underdeveloped countries learn to tax?” asked Nicholas Kaldor (1963), forty years ago. Underlying this question is the assumption that if a country wishes to become ‘developed’ it needs to collect in taxes an amount greater than the 10-15 percent found in many developing countries. Kaldor’s answer to his question was essentially that since even the poorest country had sufficient ‘capacity’ in both economic and administrative terms to tax more, whether or not a particular country did so depended primarily on its political institutions. Would developing countries be fortunate enough to have those with political power voluntarily give up at least some of their power to block fiscal reform in exchange for social stability? Or would the ruling groups rather wait (in the spirit of après moi le deluge) for the revolutionary upheaval that he considered the only alternative?
    Keywords: Societal Institutions,Tax Effort,Developing Countries
    Date: 2004–09–01
  9. By: David L. Sjoquist (Andrew Young School of Policy Studies, Georgia State University)
    Abstract: This Working Paper on the property tax contains an Executive Summary and four chapters. In Chapter One we describe how the Jamaican property tax functions. In Chapter Two we present an analysis of various problems and issues that surround of the property tax. Chapter Three, which was co-authored with Ki-Whan Choi, presents an analysis of a land value tax versus a capital value tax. Finally, in Chapter Four we present options for reform.
    Keywords: Land Value Tax,Jamaica,Tax Reform
    Date: 2004–12–01
  10. By: Roy Bahl (Andrew Young School of Policy Studies, Georgia State University)
    Abstract: The stamp duty and property transfer tax in Jamaica yielded less than J$4 billion in revenues in 2003. As a percent of GDP, and as a percent of total taxes raised, there has been a long term decline in revenue from these two sources. However, even though these taxes do not dominate the revenue structure, they often figure prominently in discussions about what is wrong with Jamaica’s tax system. There are many problems with the stamp duty and property transfer tax and there have been calls for their elimination. Why have they been retained? Even at only about 4 percent of total taxes, they account for a significant amount of revenue. In fact, in 2002-2003, revenues from these two taxes were equivalent in amount to 22 percent of collections from the domestic portion of the GCT. Another justification for these taxes is that they plug a hole in a leaky tax enforcement system, and capture some Jamaicans who may escape the income tax net.
    Keywords: Jamaica, Property Transfer Tax,Stamp Duty
    Date: 2004–12–01
  11. By: Sally Wallace (Andrew Young School of Policy Studies, Georgia State University); James Alm (Andrew Young School of Policy Studies, Georgia State University)
    Abstract: Jamaica’s individual income tax is an important revenue source for the Government. In 2003-04, the PAYE portion of the tax generated $27 billion, about 22 percent of Government tax revenue and equivalent to about 6.5 percent of GDP. The self-employed pay less than $2 billion in income tax, or 7 percent of PAYE. Jamaica uses the individual income tax more intensively than does the typical Caribbean or developing country The tax effort for the personal income tax in Jamaica is more than twice that of similarly situated countries.
    Keywords: Jamaica, Individual Income Tax
    Date: 2004–12–01
  12. By: James Alm (Andrew Young School of Policy Studies, Georgia State University); Sally Wallace (Andrew Young School of Policy Studies, Georgia State University)
    Abstract: This staff paper analyzes this “system” of payroll taxes and contributions, focusing mainly on the tax and contribution side rather than on the benefit aspects of the contribution programs. The administration of each of these payroll programs is discussed, and the effects of the entire system are also analyzed. Much of the analyses is based on microsimulation models developed in the course of this tax reform project.
    Keywords: Jamaica, Payroll Taxes
    Date: 2004–12–01
  13. By: Dillon Alleyne; James Alm (Andrew Young School of Policy Studies, Georgia State University); Roy Bahl (Andrew Young School of Policy Studies, Georgia State University); Sally Wallace (Andrew Young School of Policy Studies, Georgia State University)
    Abstract: The Government of Jamaica imposes a wide range of taxes on income, consumption, and property. An important consideration in any reform of these taxes is their impact of the distribution of income, or their tax burden. This staff paper presents background and analysis of the burden of the existing system of taxes. The question of “who bears the final burden of a tax?” is a fundamental one. Any tax will cause individuals and firms to change their behaviors, and the resulting changes in product and factor prices will affect the “incidence”, or the distributional effects, of the tax. Economists have devoted much attention to the question of tax incidence. Although there is wide agreement about the incidence of some taxes, such as excise or individual income taxes, the incidence of other taxes remains controversial. Even so, several basic “principles” of tax incidence should be kept in mind.
    Keywords: Jamaica, Tax Burden
    Date: 2004–12–01
  14. By: Mark Rider (Andrew Young School of Policy Studies, Georgia State University)
    Abstract: The Corporate Income Tax (CIT) in Jamaica is an important source of revenue. In 2002, the share of CIT in total tax revenue was approximately 6.9 percent, having fallen from 12.7 percent in 1993. Although OECD countries generally collect about 10 percent of tax revenue from corporate taxes, the downward trending share exhibited by the CIT in Jamaica is generally consistent with international experience. In fact, the share in Jamaica may be greater than expected given the large number of tax incentives and administrative weaknesses in the enforcement of Jamaica’s CIT.
    Keywords: Jamaica, Corporate Income Tax,Tax Incentives
    Date: 2004–12–01
  15. By: David Bek; Ian W Jones; Michael J Pollitt
    Abstract: This paper attempts to enhance understanding of the process by which multinationals build social capital by examining the Corporate Citizenship (CC) activities and associated social capital outcomes of the UK-based branded alcoholic drinks company, Diageo. The firm possesses a structured portfolio of CC initiatives and projects and has a long-standing tradition of community engagement. This paper examines Diageo’s CC strategy in depth and considers the ways that their engagements impact upon social capital development in different arenas. The forces driving social capital outcomes are considered and implications for companies and governments are offered.
    Keywords: social capital, corporate citizenship, Diageo, community programmes.
    JEL: M14 Z13
  16. By: Goergen,Marc; Martynova,Martina; Renneboog,Luc (Tilburg University, Center for Economic Research)
    Abstract: This paper contributes to the research on corporate governance by predicting the effects of European takeover regulation. In particular, we investigate whether the recent reforms of takeover regulation in Europe are leading to a harmonization of the national legislations. With the help of 150 corporate governance lawyers from 30 European countries, we collected the main changes in takeover regulation. We assess whether a process of convergence towards the Anglo-(American) corporate governance system has been started and we find that this is the case. We make predictions as to the consequences of the reforms for the ownership and control. However, we find that, while in some countries the adoption of a unified takeover code may result in dispersed ownership, in others it may further consolidate the blockholder-based system.
    JEL: G3 G34 G38 K2 K22 K40 G32
    Date: 2005
  17. By: Erich Gundlach; Susanne Hartmann
    Abstract: We consider whether Sub-Saharan African (SSA) countries are mainly poor because they are governed worse than other countries, as suggested by recent studies on the supremacy of institutions. Our empirical results show that the supremacy of institutions does not hold. SSA countries appear to face very specific development problems. Given their geographic and economic constraints, we conclude that SSA countries are on average not governed worse than other comparable countries. Our finding supports the basic argument of a recent UN report (UN Millennium Project 2005). However, we find that the UN report is based on empirical evidence that appears to imply the supremacy of institutions.
    Keywords: Development, institutions, disease ecology, Sub-Saharan Africa
    JEL: O1 O4
    Date: 2005–04

This nep-acc issue is ©2005 by Bernardo Batiz-Lazo. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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