nep-acc New Economics Papers
on Accounting
Issue of 2005‒06‒05
23 papers chosen by
Bernardo Batiz-Lazo
Bristol Business School

  1. A Theory of Pyramidal Ownership and Family Business Groups By Heitor Almeida; Daniel Wolfenzon
  2. Does Corporate Ownership Matter? Service Provision in the Hospital Industry By Jill R. Horwitz
  3. Corporate Social Responsibility: Strategic Implications By Abagail McWilliams; Donald S. Siegel; Patrick M. Wright
  4. Capital Income Taxation and the Dual Income Tax By Shigeki Morinobu
  5. Évaluation de risque du projet de migration vers la suite bureautique libre sous Linux <BR>Groupe utilisateurs finaux By Malika Aboubekr; Suzanne Rivard
  6. Is Cash Negative Debt? A Hedging Perspective on Corporate Financial Policies By Viral V. Acharya; Heitor Almeida; Murillo Campello
  7. The Public Financial System in Japan - Re-verification of the ballooning theory and the privileged government enterprise theory By Nobuyoshi Yamori; Narunto Nishigaki
  8. On Taxation Pass-Through for a Monopoly Firm. By Rabah Amir; Isabelle Maret; Michael Troge
  9. Political Relationships, Global Financing and Corporate Transparency By Christian Leuz; Felix Oberholzer-Gee
  10. The Importance of Faith: Tax Morale and Religiosity By Benno Torgler
  11. Tax Morale and Institutions By Benno Torgler
  12. Moral Suasion: An alternative tax policy strategy? Evidence from a controlled field experiment in Switzerland By Benno Torgler
  13. Tax Morale in Asian Countries By Benno Torgler
  14. Tax Morale in Australia: What Shapes it and Has it Changed over Time? By Benno Torgler; Kristina Murphy
  15. Tax Morale, Trust and Corruption: Empirical Evidence from Transition Countries By Benno Torgler
  16. A Knight Without a Sword or a Toothless Tiger? The Effects of Audit Courts on Tax Morale in Switzerland By Benno Torgler
  17. 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
  18. Culture Differences and Tax Morale in the United States and in Europe By James Alm; Benno Torgler
  19. Does Culture Influence Tax Morale? Evidence from Different European Countries By Benno Torgler; Friedrich Schneider
  20. Taxation and Conditional Cooperation By Bruno S. Frey; Benno Torgler
  21. Attitudes Towards Paying Taxes in Austria: An Empirical Analysis By Benno Torgler; Friedrich Schneider
  22. What Shapes the Attitudes Towards Paying Taxes? Evidence from Switzerland, Belgium and Spain By Benno Torgler; Friedrich Schneider
  23. Fiscal Autonomy and Tax Morale: Evidence from Germany By Benno Torgler; Jan Werner

  1. By: Heitor Almeida; Daniel Wolfenzon
    Abstract: We provide a rationale for pyramidal ownership (the control of a firm through a chain of ownership relations) that departs from the traditional argument that pyramids arise to separate cash flow from voting rights. With a pyramidal structure, a family uses a firm it already controls to set up a new firm. This structure allows the family to 1) access the entire stock of retained earnings of the original firm, and 2) to share the new firm's non-diverted payoff with minority shareholders of the original firm. Thus, pyramids are attractive if external funds are costlier than internal funds, and if the family is expected to divert a large fraction of the new firm's payoff; conditions that hold in an environment with poor investor protection. The model can differentiate between pyramids and dual-class shares even in situations in which the same deviation from one share-one vote can be achieved with either method. Unlike the traditional argument, our model is consistent with recent empirical evidence that some pyramidal firms are associated with small deviations between ownership and control. We also analyze the creation of business groups (a collection of multiple firms under the control of a single family) and find that, when they arise, they are likely to adopt a pyramidal ownership structure. Other predictions of the model are consistent with systematic and anecdotal evidence on pyramidal business groups.
    JEL: G32
    Date: 2005–05
  2. By: Jill R. Horwitz
    Abstract: Three types of firms %uF818 nonprofit, for-profit, and government %uF818 own U.S. hospitals, yet we do not know whether ownership results in the specialization of medical service provision. This study of over 30 medical services in urban, general hospitals (1988-2000) shows that ownership types specialize in medical services according to the profitability of those services. The paper examines three theories to explain the differences: 1) objectives, 2) capital prices, and 3) market characteristics. The findings are best explained by differences in the objectives adopted by hospital types rather than differences in capital constraints faced by them. Preliminary evidence suggests that hospital behavior depends on the ownership form of neighboring hospitals.
    JEL: I1 L3 L2
    Date: 2005–05
  3. By: Abagail McWilliams (College of Business Administration, University of Illinois at Chicago, 601 South Morgan Street, Chicago, IL 60607-7123, United States); Donald S. Siegel (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA); Patrick M. Wright (School of Industrial and Labor Relations Cornell University, 393 Ives Hall, Ithaca, NY 14853-3901, United States)
    Abstract: We describe a variety of perspectives on corporate social responsibility (CSR), which we use to develop a framework for consideration of the strategic implications of CSR. Based on this framework, we propose an agenda for additional theoretical and empirical research on CSR. We then review the papers in this special issue and relate them to the proposed agenda.
    JEL: L15 L21 M14
    Date: 2005–05
  4. By: Shigeki Morinobu (Ministry of Finance Japan)
    Abstract: In June 2004, the Government Tax Commission presented its report on the unified taxation system for financial income (hereinafter referred to as “integration of taxes on financial income”). Theoretically, the dual income tax (DIT) discussion introduced mainly in Nordic countries is at the core of the discussion about integration of taxes on financial income. The Tax Commission’s mid-term policy report (hereinafter referred to as “the mid-term policy report”), submitted in June 2002, lists DIT as a key issue for future consideration. Then, in the revised report submitted in November of the same year, the commission argues: “Establishing a tax system that is fair, simple, and easy to understand should be the basis of all taxes on financial assets. From this perspective, which meets the policy demand for a shift ‘from savings to investment,” with regard to the tax structure for financial transactions, the tax authorities should not only strive to ensure neutrality between financial instruments regarding taxes on interest, dividends, and capital gains but also aspire to integrate the various categories of financial income. In this case, the integration of taxes on financial income and the DIT should be considered as a future direction.” Specifically, in the FY 2003 tax reform, dividend income (large accounts excluded), which until then was taxed as part of aggregate income, is taxed as separate income and at the same rate as are capital gains and interest. In this paper, we will first give an overview of the discussions thus far on dual income tax, after which we will take up various issues surrounding the integration of taxes on financial income.
    Keywords: tax commision, financial income, dual income tax (DIT),
    JEL: H24 D14 H71
    Date: 2004–01
  5. By: Malika Aboubekr; Suzanne Rivard
    Abstract: <P>La percée et les performances des logiciels libres incitent de plus en plus au questionnement sur leurs réelles capacités et surtout sur l’opportunité de les choisir. C’est dans cette perspective que le projet de migration vers la suite bureautique sous Linux a été lancé au Sous-secrétariat à l’inforoute gouvernementale et aux ressources informationnelles (SSIGRI). Son accompagnement par une équipe de chercheurs du CIRANO a pour objectif d’en évaluer les risques et d’en identifier les conditions de succès.<P> Ce rapport porte sur l’évaluation de l’exposition au risque du projet pour l’un des groupes participants, groupe « Utilisateurs finaux ». <BR> <B>Les principaux résultats</B> <BR>La carte de risque et l’analyse des facteurs permettent de faire les constats suivants : <UL> <LI> L’exposition au risque du projet est de moyenne à élevée; <LI> Trois objectifs, et plus particulièrement le premier, sont soumis à un degré de risque relativement élevé : Continuité opérationnelle pour l’utilisateur, Continuité d’interaction pour les utilisateurs et Soutien technique. <LI> Deux facteurs de risque ont été sous-évalués dans ce projet et ce, de par la nature même du projet :<BR> <UL>- Inadéquation fonctionnalités de la suite bureautique libre/fonctionnalités visées par l’organisation;</UL> <UL>- Degré d’interdépendance avec des unités/personnes hors projet. L’ importance de ce facteur est due au contexte dans lequel se déroule le projet en particulier à l’absence de cadre commun d’interopérabilité.</UL> <LI> Une révision de ces facteurs de risque pourrait entraîner un nouveau positionnement sur la carte d’exposition au risque pour quatre objectifs, sur les cinq, en particulier pour les deux objectifs qui sont liés aux deux facteurs sous-évalués.<BR> <UL>- Continuité d’interaction pour l’utilisateur;</UL> <UL>- Adaptation des utilisateurs à leur nouvel environnement
    Date: 2005–05–01
  6. By: Viral V. Acharya; Heitor Almeida; Murillo Campello
    Abstract: We model the interplay between cash and debt policies in the presence of financial constraints. While saving cash allows financially constrained firms to hedge against future income shortfalls, reducing debt - "saving borrowing capacity" - is a more effective way of securing future investment in high cash flow states. This trade-off implies that constrained firms will allocate excess cash flows into cash holdings if their hedging needs are high (i.e., if the correlation between operating cash flows and investment opportunities is low). However, constrained firms will use excess cash flows to reduce current debt if their hedging needs are low. The empirical examination of cash and debt policies of a large sample of constrained and unconstrained firms reveals evidence that is consistent with our theory. In particular, our evidence shows that financially constrained firms with high hedging needs have a strong propensity to save cash out of cash flows, while showing no propensity to reduce outstanding debt. In contrast, constrained firms with low hedging needs systematically channel free cash flows towards debt reduction, as opposed to cash savings. Our analysis points to an important hedging motive behind standard financial policies such as cash and debt management. It suggests that cash should not be viewed as negative debt.
    JEL: G31
    Date: 2005–06
  7. By: Nobuyoshi Yamori (Nagoya University); Narunto Nishigaki (Okayama University)
    Abstract: The large weight of public financial institutions is often identified as one of the characteristics of the Japanese financial system. It is believed that reform of the private financial sector is not enough to revitalize the Japanese financial system, but reform of the public financial sector is crucial. There are various opinions concerning ideal public financial institutions, and heated debate continues. We would like to raise attention to the point that much discourse is based on the prerequisite that public financial sector is still increasing (i.e., the ballooning theory). However, only a small number of arguments present grounds for the prerequisite, and even in the case of those based on statistical analyses, such analyses are not rigorously verified. Under these circumstances, the first purpose of this paper is to reverify the ballooning theory of public financial sector which is used as a prerequisite for much of the discourse.
    Keywords: financial institutions, Japan, public financial sector,
    JEL: P11 F36 H24
    Date: 2005–01
  8. By: Rabah Amir; Isabelle Maret; Michael Troge
    Abstract: This paper investigates the pass-through of an excise tax imposed on a monopoly firm with constant marginal cost. The optimal price increases as tax increases for any demand function. Tax pass-through is globally under or in excess of 100% according as the direct demand function is log-concave or log-convex. The analysis relies on supermodular optimization and delivers conclusions based on minimal su¢cient assumptions in a simple, broadly accessible and self-contained framework. Further results allow for mixed conditions that provide precise and local determination of pass-through. Several illustrative examples are given. Policy conclusions relating to the relative wisdom of taxing high versus low cost monopoly firms are drawn from the results.
    Date: 2004
  9. By: Christian Leuz; Felix Oberholzer-Gee
    Abstract: This study examines the financing choices of firms operating in a weak institutional environment. We argue that in relationship-based systems, global financing and political connections are substitutes: Well-connected firms are less likely to access foreign capital markets because (state-owned) domestic banks provide capital at low cost. Moreover, the additional scrutiny that comes with foreign securities might be at odds with close political ties at home. Using data from Indonesia, we provide strong support for this hypothesis. Firms with close political ties to former President Soeharto are significantly less likely than non-connected firms to have publicly traded foreign securities. We also examine how returns before and during the Asian financial crisis differ between firms with and without foreign securities. The former performed significantly better during the crisis, and their performance advantage increases considerably once we control for a firm’s closeness to the Soeharto regime. We show that simple return regressions in earlier work are downward biased if domestic opportunities such as political connections are ignored.
    Keywords: Disclosure; Cross listing; Financing choices; Emerging market economies; Asian financial crisis; Indonesia; Cost of capital
    JEL: P16 G32 G38 K22 K42 M41 G18
    Date: 2003–08
  10. By: Benno Torgler
    Abstract: The intention of this paper is to analyze religiosity as a factor that potentially affects tax morale. For this purpose, a multivariate analysis has been done with data from the World Values Survey 1995- 1997, covering more than thirty countries at the individual level. Several variables, such as church attendance, religious education, being an active member of a church or a religious organization, perceived religiosity, religious guidance and trust in the church have been analyzed. The results suggest that religiosity raises tax morale.
    Keywords: Tax morale; Tax compliance; Religiosity
    JEL: H26 H73 K42
    Date: 2003–10
  11. By: Benno Torgler
    Abstract: This paper analyses the impact of direct democracy, trust in government, the court and the legal system, and federalism on tax morale. In the tax compliance literature it is novel to analyse tax morale as dependent variable and to systematically analyse the effects of formal and informal institutions in Switzerland, a country where participation rights and the degree of federalism vary across different cantons. We used two different data sets at the individual level (World Values Survey and International Social Survey Programme). The findings suggest that direct democratic rights, local autonomy, and trust in government, the court and the legal system have a significantly positive effect on tax morale.
    Keywords: Tax Morale; Tax Compliance; Tax Evasion; Direct Democracy; Local Autonomy
    JEL: H26 H73 D70
    Date: 2003–11
  12. By: Benno Torgler
    Abstract: In a controlled field experiment in Switzerland this paper analyses the effects of moral suasion on the timely paying and filling out of the tax form 2001, and the honesty regarding the declaration of domestic income from capital gains, lottery winnings, and certain insurance benefits. Comparisons of different tax filling years and multiple regression estimations have been done using these three factors as dependent variables to check if there is a significant difference between the control group and the treatment group, controlling for additional factors that might influence compliance behaviour. In February 2002 the treatment group received a letter signed by the commune’s fiscal commissioner containing normative appeals. Results indicate that moral suasion has hardly any effect on taxpayers’ compliance behaviour. The strongest effect can be observed for the variable tax payments.
    Keywords: tax compliance; morale suasion; field experiment
    JEL: H26 H71
    Date: 2004–01
  13. By: Benno Torgler
    Abstract: This paper analyses tax morale in several Asian countries. The descriptive analysis indicates that tax morale is very low in the Philippines and relatively high in Japan, China, and Bangladesh. In general Asia has a higher tax morale than OECD countries, which might indicate cultural differences. The paper also analyses tax morale as a dependent variable and thus gives answers to what shapes tax morale. Pooling the Asian countries we find, e.g., that trust in the government and the legal system have a positive effect on tax morale. These results remain robust for India and Japan in a time series analysis.
    Keywords: tax morale; tax evasion; shadow economy
    JEL: H26 K42
    Date: 2004–01
  14. By: Benno Torgler; Kristina Murphy
    Abstract: Why citizens pay their taxes voluntarily is an important question for tax administrations worldwide. Some believe it is because taxpayers are deterred from tax evasion out of a fear of being caught or penalised. Others, in contrast, suggest that factors such as the level of tax morale one has (i.e., the intrinsic motivation one has to pay their tax) affects compliance behaviour. While there have been numerous empirical studies published that have explored the role of deterrence on tax compliance behaviour, very few studies have explored the concept of tax morale in any detail. This study therefore attempts to rectify this gap in the literature. If tax morale is important in determining compliance behaviour, as several researchers have suggested, then it is also important to understand what might affect one’s level of tax morale. The specific aim of this paper will be to identify factors that shape or have an impact on tax morale. Using data collected from the Australian wave of the 1981 and 1995 World Values Survey, this study will demonstrate that factors such as trust and moral beliefs play an important role in shaping tax morale in Australia. Further, it will be shown that tax morale has increased significantly in Australia since the early 1980s, and that it has done so at a faster rate than many other OECD countries. Possible explanations for this increase will be discussed.
    Keywords: Tax Morale; Tax Compliance; Tax Evasion; Australia
    JEL: H26 H73
    Date: 2004–01
  15. By: Benno Torgler
    Abstract: This paper analyses tax morale in transition countries. Tax morale has been used as dependent variable working with World Values Survey and European Values data for different years (1990-2000). The results suggest that trust, measured as trust in the legal system, the government, the parliament and the national officers has a strong impact on tax morale. Furthermore, a higher degree of satisfaction with the political system leads to a higher tax morale. Furthermore, the paper investigates the correlation between corruption and tax morale. The bivariate as well as the multivariate analysis show that in transition countries a higher corruption leads to a lower tax morale.
    Date: 2004–02
  16. By: Benno Torgler
    Abstract: The intention of this paper is to analyse how audit courts affect tax morale, controlling in a multivariate analysis for a broad variety of potential factors. Switzerland with its variety of audit court competences among the cantons has been analysed. With data from the ISSP for 1999 evidence has been found that a higher audit court competence has a significantly positive effect on tax morale. Thus, the results in Switzerland suggest that in the cantons where audits courts are not just knights without swords or toothless tigers, they help improve taxpayers’ tax morale and thus citizens’ intrinsic motivation to pay taxes.
    Keywords: Tax Morale; Tax Compliance; Tax Evasion; Audit Courts Direct Democracy; Local Autonomy
    JEL: H26 H73 D70
    Date: 2004–04
  17. By: Ronald G. Cummings; Jorge Martinez-Vazquez; 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 Evasion; Tax Morale; Culture
    JEL: H26 C91
    Date: 2004–06
  18. By: James Alm; Benno Torgler
    Abstract: In recent years much research has investigated whether values, social norms, and attitudes differ across countries and whether these differences have measurable effects on economic behavior. One area in which such studies are particularly relevant is tax compliance, given both the noted differences across countries in their levels of tax compliance and the marked inability of standard economic models of taxpayer compliance to explain these differences. In the face of these difficulties, many researchers have suggested that the intrinsic motivation for individuals to pay taxes – what is sometimes termed their “tax morale” – differs across countries. However, isolating the reasons for these differences in tax morale is notoriously difficult. In a common approach, studies sometimes referred to as “cultural studies” have often relied upon controlled laboratory experiments conducted in different countries because such experiments can be set up with identical experimental protocols to allow cultural effects to be isolated. In this paper we first analyze a cross-section of individuals in Spain and the United States using the World Values Survey (WVS). In line with previous experiments, our findings indicate a significantly higher tax morale in the United States than in Spain, controlling in a multivariate analysis for additional variables. We then extend our multivariate analysis to include 14 European countries in the estimations. Our results again indicate that the United States has the highest tax morale across all countries, followed by Austria and Switzerland. We also find a strong negative correlation between the size of shadow economy and the degree of tax morale in those countries.
    Keywords: Tax Morale; Tax Compliance; Tax Evasion; Culture
    JEL: H26 H73
    Date: 2004–07
  19. By: Benno Torgler; Friedrich Schneider
    Abstract: There is considerable evidence that enforcement efforts cannot fully explain the high degree of tax compliance. Previous studies have found differences in compliance behaviour across cultures. Novel in this paper is to investigate the impact of culture differences within a country rather than between countries. Thus, the main purpose of the paper is to see how culture affects tax morale, using World Values Survey (WVS) and European Values Survey (EVS) data. The empirical findings focus individually on Switzerland, Belgium and Spain, countries with a certain cultural variety. In general, the results indicate that the cultural background seems not to have a strong effect on tax morale within a country. However, there is evidence that there is a strong interaction between culture and institutions, which has a strong impact on tax morale.
    Keywords: Tax Morale; Tax Compliance; Tax Evasion; Culture
    JEL: H26 H73
    Date: 2004–07
  20. By: Bruno S. Frey; Benno Torgler
    Abstract: Why so many people pay their taxes, although fines and audit probability are low, has become a central question in the tax compliance literature. Concepts of Homo Economicus, endowed with a more refined motivation structure, help to shed light on the tax compliance puzzle. This paper provides empirical evidence for the relevance of conditional cooperation, using survey data from 30 European countries. The findings suggest that a higher perceived tax evasion leads to a lower tax morale, also when controlling for additional factors in a multivariate analysis.
    Keywords: tax morale; tax compliance; tax evasion; pro-social behavior
    JEL: H26 H73 D64
    Date: 2004–08
  21. By: Benno Torgler; Friedrich Schneider
    Abstract: People mostly pay their taxes although there is a low probability of getting caught and being penalized. Thus, new attempts in the tax compliance literature try to go beyond standard economic theory. This paper examines citizens’ attitudes toward paying taxes – what is sometimes termed their “tax morale”, or the intrinsic motivation to pay taxes. Tax morale may be a key determinant to explain why people are honest. However, there are very few papers that explore the concept of tax morale theoretically and empirically. This study, based on the World Values Survey and the European Values Survey, therefore attempts to fill this gap in the literature, focusing on tax morale in Austria. Societal institutions such as trust or pride have been identified as key determinants that shape tax morale in Austria. Furthermore, a lower perceived compliance leads to a decrease of tax morale, which indicates that social comparisons are relevant. The results also show a decrease of tax morale between 1990 and 1999, although Austria’s taxpayers still have a very high tax morale compared to other European countries.
    Keywords: Tax Morale; Societal Institutions; Austria
    JEL: H26 H73 D64
    Date: 2004–11
  22. By: Benno Torgler; Friedrich Schneider
    Abstract: There is considerable evidence that enforcement efforts cannot fully explain the high degree of tax compliance. To resolve this puzzle of tax compliance, many researchers have argued that citizens’ attitudes toward paying taxes or tax morale, seen as the intrinsic motivation to pay taxes, can help to explain the high degree of tax compliance. However, most studies treat tax morale as a black box without discussing which factors shape it. Additionally, there is a lack of empirical evidence in the tax compliance literature that investigate attitudes towards paying taxes in Europe. Thus, a unique aspect in this paper is to examine citizens’ attitudes towards paying taxes in the three European countries Switzerland, Belgium and Spain, allowing thus to investigate in detailed way the impact of internal and external institutions.
    Keywords: Tax Morale; Tax Compliance; Tax Evasion; Internal and External Institutions.
    JEL: H26 H73
    Date: 2005–02
  23. By: Benno Torgler; Jan Werner
    Abstract: This paper analyses fiscal autonomy in Germany. First, it provides an overview of fiscal autonomy. What is novel in this paper compared to previous studies is the development of a fiscal autonomy coefficient for the states, based on communal data. The basic intention in the empirical part is to analyse how fiscal autonomy affects tax morale, defined as the intrinsic motivation to pay taxes, in Germany. Strong evidence has been found that a higher fiscal autonomy leads to a higher tax morale, controlling in a multivariate analysis for additional factors. Thus, this paper fills a gap in the tax compliance literature, which has rarely analysed the impact of fiscal autonomy on compliance
    Keywords: Tax Morale; Tax Compliance; Fiscal Autonomy; Germany
    JEL: H26 H73 D70
    Date: 2005–02

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