nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2006‒05‒20
seven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Accounting and Economic Rates of Return: a Dynamic Econometric Investigation By Rodrigo M. Zeidan; Marcelo Resende
  2. Manipulação para Evitar Perdas: o Impacto do Conservantismo By José António Moreira
  3. Management Accounting Practices and Discourses Change: The role and use of Management Accounting Systems By Vieira, Rui; Hoskin, Keith
  4. Corporate Sector Debt Composition and Exchange Rate Balance Sheet Effect in Turkey By Mehtap Kesriyeli; Erdal Ozmen; Serkan Yigit
  5. Introducing Peer-Assisted Learning in First Year Accounting in Australia By Rod O'Donnell
  6. Sudden Stops and IMF-Supported Programs By Barry Eichengreen; Poonam Gupta; Ashoka Mody
  7. A multi-factor model for the valuation and risk managment of demand deposits By Hans Dewachter; Marco Lyrio; Konstantijn Maes

  1. By: Rodrigo M. Zeidan; Marcelo Resende
    Abstract: Many studies have questioned empirical utilization of accounting data as internal rates of return would be more consistent with the relevant economic concept. The paper investigates the dynamic relationships between different measures of accounting rates of return (ARRs) and different approximations for the internal rates of returns (IRRs). In contrast with the prevailing case-study investigations, one considers a panel for quoted Brazilian firms in the manufacturing industry along the 1988-3/2003-2 period. Granger causality tests are considered and even though the results are not completely clear cut, some discernible uni-directional patterns emerge. In particular, there seems to be informational content between economic and accounting rates of return, between ROA (Net Profits/Total Assets) and PM (Gross Profits/ Operational Income), and internal rates of return. This seems to indicate that there is some validity in using accounting rates of return in certain economic studies.
    JEL: M21 M41
    Date: 2006
  2. By: José António Moreira (CETE, Faculdade de Economia, Universidade do Porto)
    Abstract: In this paper I analyze the interaction between firms’ earnings management behavior and conservatism. I predict that firms having conservatism-related bad news in the period have more pervasive earnings management than firms having good news. Departing from Burgstahler and Dichev (1997) methodology to detect earnings management, and taking the sign of market returns as a proxy for conservatism effects, I find empirical evidence that supports the prediction of an interaction between firms’ earnings management behavior and conservatism. The evidence is thus consistent with the discontinuities around zero in the earnings distributions being driven, at least partly, by firms’ earnings management behavior, and is robust to controlling for other effects mentioned in the literature as potential determinants of such discontinuities.
    Keywords: Earnings management, conservatism, earnings distribution discontinuities.
    JEL: M41 C21 L29
    Date: 2006–05
  3. By: Vieira, Rui; Hoskin, Keith
    Abstract: This paper aims to trace the development of management accounting systems (MAS) in a Portuguese bank, where an activity based costing system (ABC) has been trialled for implementation over the past few years, as a means to improving the economy, efficiency and effectiveness of employee activity. This initiative can be located in a wider cultural change in Portuguese banking towards global (i.e. US derived) strategies and processes, but within an organizational world where older traditions remain powerful. The research undertaken here is a longitudinal case study of organisational change in one institution based on a criticalinterpretive model. Although drawing on the interpretive tradition since it is concerned with actors’ perceptions, interpretations and beliefs, it also draws on a more historically focused Foucault-inspired critical framework of the kind developed in the work of Hoskin and Macve (e.g. 1986, 1988, 1994, 2000), and in the research into the financial sector undertaken by Morgan and Sturdy (2000). The particular model developed here is designed to enable the exploration of the effect of accounting practices on change across time from three perspectives – changing structures, changing discourses and the effect of both of these processes on power relations. The research highlights the increase in visibility and perceived importance of accounting in the banking sector, and how accounting is significant beyond its technical roles. The study provides new insights into how management accounting practices, along with other organisational systems, play an important role questioning, visualising, analysing, and measuring implemented strategies. As the language and practice of management have shifted towards strategy and marketing discourses, patterns of work, organisation and career are being restructured, in often under-appreciated ways, by accounting practices.
    Date: 2006
  4. By: Mehtap Kesriyeli (Research Department, Central Bank of the Republic of Turkey, Ankara, Turkey); Erdal Ozmen (Department of Economics, METU); Serkan Yigit (Research Department, Central Bank of the Republic of Turkey, Ankara, Turkey)
    Abstract: This paper investigates the causes and balance sheet effect consequences of the liability dollarisation of non-financial sectors in Turkey using the Company Accounts database compiled by the Central Bank of Turkey. The results from the panel EGLS and GMM procedures suggest that both sector-specific (tangibility, leverage ratio, export share) and macroeconomic condition variables (inflation, real exchange rate change, budget deficits and confidence) are significant in explaining the corporate sector liability dollarisation. Firms are found to match only partially the currency composition of their debt with their income streams making them potentially vulnerable to negative balance sheet affects of real exchange rate depreciation shocks. Consistent with this argument, real exchange rate depreciations are found to be contractionary, in terms of investments and profits, for sectors with higher liability dollarisation. Macroeconomic instability, as proxied by budget deficits and inflation, appears to have a significant negative affect on the performance of the firms in the non-financial sectors, in terms of their investments, sales and profits. Our results also stress the importance of strong macroeconomic policy stance and price stability for an endogenous dedollarisation process along with regulatory measures to limit vulnerabilities caused by dollarisation.
    Keywords: Balance sheet effects, Capital structure, Corporate sector, Debt composition, Liability dollarisation, Turkey
    JEL: E22 F31 G32
    Date: 2005–11
  5. By: Rod O'Donnell (Department of Economics, Macquarie University)
    Abstract: Australian universities are giving increasing attention to peer-assisted learning (or supplemental instruction) as a means of meeting some of the demanding challenges that have arisen over the last fifteen years. At Macquarie University, Sydney, a two year (2003-04) trial has been conducted of this form of supplemental instruction in selected Accounting courses. This paper discusses the first stage of the trial in terms of its design, outcomes, benefits and costs, and lessons learned. Consistent with earlier studies, it is found that peerassisted learning is best approached as a flexible system capable of adaptation to the specificities of local teaching and learning environments.
    Keywords: Peer-assisted learning; supplemental instruction; at-risk students
    JEL: A20 A22
    Date: 2004–12
  6. By: Barry Eichengreen; Poonam Gupta; Ashoka Mody
    Abstract: Could a high-access, quick-disbursing “insurance facility” in the IMF help to reduce the incidence of sharp interruptions in capital flows (“sudden stops”)? We contribute to the debate on this question by analyzing the impact of conventional IMF-supported programs on the incidence of sudden stops. Correcting for the non-random assignment of programs, we find that sudden stops are fewer and generally less severe when an IMF arrangement exists and that this form of “insurance” works best for countries with strong fundamentals. In contrast there is no evidence that a Fund-supported program attenuates the output effects of capital account reversals if these nonetheless occur.
    JEL: F02 F32 F34
    Date: 2006–05
  7. By: Hans Dewachter (Catholic University of Leuven, Center for Economic Studies; Erasmus University Rotterdam, Rotterdam School of Management); Marco Lyrio (University of Warwick, Warwick Business School, Finance Group); Konstantijn Maes (National Bank of Belgium, Financial Stability Department)
    Abstract: How should we value and manage deposit accounts where deposits have a zero contractual maturity, but which, in practice, remain stable through time and are remunerated below market rates? Does the economic value of the deposit account differ from the face value and can we reliably measure it? To what extent is the economic value sensitive to yield curve changes? In this paper, we try to answer the above questions. The valuation is performed on yield curve, deposit rate and deposit balance data between December 1994 and June 2005 for a sample of Belgian bank retail savings deposits accounts. We find that the deposits premium component of Belgian savings deposits is economically and statistically significant, though sensitive to assumptions about servicing costs and outstanding balances average decay rates. We also find that deposit liability values depreciate significantly when market rates increase, thereby offsetting some of the value losses on the asset side. The hedging characteristics of deposit accounts depend primarily on the nature of the underlying interest rate shock (yield curve level versus slope shock) and on the average decay rate. We assess the reliability of the reported point estimates and also report corresponding duration estimates that results from a dynamic replicating portfolio model approach more commonly used by large international banks.
    Keywords: Demand deposits, ALM, risk management, arbitrage free pricing, flexible-affine term structure model, interest rate risk, IFRS 39, fair value accounting
    JEL: G12 G21
    Date: 2006–05

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