nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2008‒05‒24
four papers chosen by
Alexander Harin
Modern University for the Humanities

  1. A Sum&Discount Method for Appraising Firms: An Illustrative Example By Carlo Alberto Magni
  2. Mandatory Accounting Disclosure by Small Private Companies By Benito Arruñada
  3. Effects of Flat Tax Reforms in Western Europe on Equity and Efficiency By Alari Paulus; Andreas Peichl
  4. A Study of the Provision of Environmental Information in Financial Analysts Reports By Cunningham, Gary; Hassel , Lars; Nilsson, Henrik

  1. By: Carlo Alberto Magni
    Abstract: This paper presents a new way of valuing firms and measuring residual income. The method, originally introduced in Magni (2000a, 2000b, 2000c, 2001), is here renamed lost-capital paradigm. In order to enhance comprehension the presentation relies on a very simple numerical example which shows that the new paradigm of residual income enjoys a property of abnormal earnings aggregation, according to which the NPV (and therefore the market value) of the firm does not change if each residual income changes, as long as the (uncapitalized) sum of all residual incomes do not change. While radically different from the standard residual income, the difference between the two notions is equal to the interest accrued on the past cumulated standard residual incomes, which has interesting implications for incentive compensation.
    Keywords: Firm valuation, residual income; lost capital; Discount∑ Sum&Discount; incentive compensation
    JEL: G11 G12 G30 G31 M2 M41
    Date: 2007–11
  2. By: Benito Arruñada
    Abstract: Computerised databases and the Internet have recently made publication of company accounts potentially less costly and more useful, thanks to electronic filing and universal online access to credit information systems. These developments advise against simplification policies that would reduce the scope of mandatory publication. Instead, they encourage policies pursuing a broader efficiency goal, achievable by reducing costs and enhancing value through administrative reforms of filing, archive and retrieval systems. Survey and registry evidence on how the information in the accounts is valued and used by firms fully supports these claims.
    Keywords: Financial disclosure, company accounts, credit registries, business simplification
    JEL: G32 K22
    Date: 2008–05
  3. By: Alari Paulus (Institute for Social and Economic Research); Andreas Peichl (University of Cologne)
    Abstract: The flat income tax has become increasingly popular recently, yet its implementation is limited to Eastern Europe. We analyse the distributional and efficiency effects of flat tax scenarios for Western European countries. Our simulations show that flat tax rates required to attain revenue neutrality with existing basic allowances improve labour supply incentives. However, they result in higher inequality and polarisation. Flat rates necessary to keep the inequality levels unchanged allow for some scope for flat taxes to increase both equity and efficiency. Our analysis suggests that Mediterranean countries are more likely to benefit from flat taxes.
    Keywords: flat tax, income inequality, microsimulation, tax reform
    Date: 2008–03
  4. By: Cunningham, Gary (Umeå School of Business); Hassel , Lars (Umeå School of Business); Nilsson, Henrik (Umeå School of Business)
    Abstract: Reporting of environmental information along with financial information has become an important research topic. Research to date has focused on the nature of the information reported by companies. This study extends prior research by examining the inclusion of environmental information by financial analysts in their research reports of companies in the chemical and in the oil and gas industries. Both companies and the financial analysts are divided into subsets by geographic region, Europe and North America. Results show that only 35 per cent of financial analysts’ reports have environmental information. Those reports that do have such information have more environmental information for North American companies than for European companies and analysts tend to report more information for companies in their regions. The chemical industry receives more attention, especially for downside information.
    Keywords: Environmental information; financial analysts’ reports; equity valuation; content analysis
    Date: 2007–11–27

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