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on Accounting and Auditing |
| By: | Stecher, Jack D. (Dept. of Accounting, Auditing and Law, Norwegian School of Economics and Business Administration) |
| Abstract: | Accounting theory treats a wide class of equity valuation approaches as equivalent. For example, under clean surplus accounting, the earnings approach is viewed as identical to the discounted dividends approach. Empirical research, however, typically finds that the two valuation approaches do not predict market prices equally well. This paper offers a theoretical explanation for this apparent anomaly: expectations of discounted infinite sums (incomes, cash flows, or dividends) are undefined unless some restrictive probabilistic conditions hold. Without the usual stationarity and ergodicity assumptions, it may still be possible to estimate upper and lower bounds on such sums, but these bounds need not coincide. In such a setting, earnings and discounted dividends yield intervals of justifiable valuations, which intersect but need not coincide. Depending on the extent to which a firm is held by insiders, differences in the valuations that different formulae justify may not show up in market prices. This provides an explanation for two additional empirical puzzles. First, empirical studies detecting little incremental information in dividends over earnings may be predisposed toward this finding. Second, stronger apparent reactions to dividend omissions than to initiations may be an illusion. |
| Keywords: | Equity Valuation; Residual Income; Dividends |
| JEL: | C65 D82 G12 M41 |
| Date: | 2006–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2006_001&r=acc |
| By: | Eerola , Essi (RUESG, University of Helsinki); Määttänen , Niku (The Research Institute of the Finnish Economy and CEBR) |
| Abstract: | In a dynamic setting, housing is both an asset and a consumption good. But should it be taxed like other forms of consumption or like other forms of saving? We consider the optimal taxation of the imputed rent from owner housing within a version of the neoclassical growth model. We find that the optimal tax rate on the imputed rent is quite sensitive to the constraints imposed on the other available tax rates. In general, it is not optimal to tax the imputed rent at the same rate as the business capital income. |
| Keywords: | housing; capital taxation; optimal taxation |
| JEL: | E21 H21 |
| Date: | 2005–07–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2005_010&r=acc |
| By: | Koch, Christopher (Sonderforschungsbereich 504); Schmidt, Carsten (Sonderforschungsbereich 504) |
| Abstract: | Disclosure of conflict of interest is currently seen as an effective tool for reducing threats to auditor independence. Cain, Loewenstein, and Moore (2005) provide evidence for perverse effects of disclosing conflict of interest. Using a controlled laboratory experiment, we replicate their finding that such a disclosure can cause an impairment of auditor independence. However, as subjects gain experience we find that these results revert and auditors give less biased advice. Our results imply that the perverse effects noted in the literature might be an artifact of an environment with inexperienced subjects and of less relevance for the audit environment where main actors are experienced. To the contrary, disclosure of conflict of interest can even improve auditor independence by fostering fairness. Furthermore, we find that disclosure of conflict of interests disturbs reputation building. |
| Date: | 2006–09–05 |
| URL: | http://d.repec.org/n?u=RePEc:xrs:sfbmaa:06-10&r=acc |