nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2007‒01‒06
three papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Allowances for Corporate Equity in Practice By Alexander Klemm
  2. Currency Mismatches and Corporate Default Risk: Modeling, Measurement, and Surveillance Applications By Andre Santos; Jorge A. Chan-Lau
  3. The Size Distribution of Firms, Cournot, and Optimal Taxation By Mark Gersovitz

  1. By: Alexander Klemm
    Abstract: This paper provides an overview of full and partial allowance for corporate equity (ACE) tax systems in practice. In the recent past, ACE systems have been used in Austria, Croatia, and Italy. Brazil still applies a variant of such a system and Belgium introduced one this year. This paper summarizes the empirical literature on past ACE systems, and provides a theoretical and empirical assessment of the Brazilian ACE variant. The main finding is that the Brazilian reform introduced an ACE system for a minority of firms only, with the majority instead having a system of dividend deductibility. Despite the reduction in the tax preference for debt finance, capital structures have not changed much, but dividends have increased. Investment appears to have benefited from the reform, although the extent to which this was due to the new structure rather than the tax cut is unclear.
    Keywords: ACE , tax reform , corporate income tax , Tax systems , Tax reforms , Income taxes , Profits ,
    Date: 2006–11–22
  2. By: Andre Santos; Jorge A. Chan-Lau
    Abstract: Currency mismatches in corporate balance sheets have been singled out as an important factor underlying the severity of recent financial crises. We propose several structural models for measuring default risk for firms with currency mismatches in their asset/liability structure. The proposed models can be adapted to different exchange rate regimes, are analytically tractable, and can be estimated using available equity price and balance sheet data. The paper provides a detailed explanation on how to calibrate the models and discusses two applications to financial surveillance: the measurement of systematic risk in the corporate sector and the estimation of prudential leverage ratios consistent with regulatory capital ratios in the banking sector.
    Keywords: Default risk , currency mismatch , dollarization , corporate sector , econometric estimation , financial surveillance , Credit risk , Currencies , Financial crisis , Dollarization , Economic models ,
    Date: 2006–12–08
  3. By: Mark Gersovitz
    Abstract: Tax laws and administrations often treat different size firms differently. There is, however, little research on the consequences. As modeled here, oligopolists with different efficiencies determine the size distribution of firms. A government that maximizes a weighted sum of consumer surplus, profits, and tax receipts can tax firms with different efficiencies differently and provides a reference point for other, more restricted differential tax systems. Taxes include a specific sales tax, an ad valorem sales tax, and a profits tax with imperfect deductibility of capital cost, and a combination of the last two. In general there is a pattern of tax rates by efficiency of firm. It is heavily dependent on the social valuation of tax receipts. Analytic and simulation results are provided. When both ad valorem taxes and the imperfect profits tax are combined, simulations suggest that the former rate is higher and the latter rate is lower for relatively inefficient firms.
    Keywords: Optimal tax , size distribution , imperfect competition , Taxation , Profits , Tax rates , Economic models ,
    Date: 2006–12–12

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