nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2008‒07‒30
five papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Earnings Management to Exceed the Threshold: A Comparative Analysis of Consolidated and Parent-only Earnings By Akinobu Shuto
  2. On the Interplay between Strategy and Management Control Systems By Aernoudts, R.H.R.M.; De Heer, M.A.
  3. Earnings Management and Contest to the Control: An Analysis of European Family Firms By Jara-Bertin, Mauricio; López-Iturriaga, Félix J.
  4. Optimal taxation, social contract and the four worlds of welfare capitalism By Amedeo Spadaro
  5. Tournament Fever and the Perception of Strategic Uncertainty in Performance Contests By Tobias Uske

  1. By: Akinobu Shuto (Research Institute for Economics and Business Administration, Kobe University)
    Abstract: This paper examines whether consolidated earnings are managed to a greater extent than parent-only earnings or vice versa in an attempt to exceed the threshold in Japanese firms. The analysis reveals that earnings management to avoid earnings decreases is more pronounced in parent-only earnings for the period 1980–1999. Further, it reveals that the management of parent-only earnings has been less pervasive following the introduction of the new consolidated reporting system in March 2000. In addition, this paper provides evidence suggesting that earnings management in consolidated earnings increased after March 2000. These results indicate the possibility that the new consolidated reporting system and principles reduce the incentive to manage parent-only earnings and increase that to manage consolidated earnings.
    Keywords: Earnings management; Earnings distribution; Accounting regulation; Consolidated earnings; Parent-only earnings
    Date: 2005–09
  2. By: Aernoudts, R.H.R.M.; De Heer, M.A.
    Abstract: There is considerable academic interest for the interplay between strategy and management control systems (MCS). Strategic performance measurement systems (SPMS), such as Simons’ levers of control and Kaplan and Norton's balanced scorecard were introduced in the normative literature as vehicles for developing and implementing strategy. But there are also numerable case studies and surveys that investigate empirical evidence of the interplay between management control and strategy derived from management practices. This paper is a review of the extant literature aimed at identifying developments and gaps within this specific area of accounting research. To this end literature from six fields of research has been searched in a structured manner using exhaustive search algorithms. Studies are analysed using Mohr’s (1982) approaches to explanation and frameworks of Langfield-Smith (1997) and Keating (1995). The review by Langfield-Smith (1997) indicated that literature in this specific area of scholarly inquiry is characterized by a diversity of research designs and ambiguity in operationalization of - among other variables - strategy. Analysis of survey & case based research performed during the last decade reveals that operationalization of strategy is more than often based on one of the established strategy frameworks and is currently not as diverse as reported in Langfield-Smith (1997). Several scholars indicate that knowledge in this area is still rather limited, however comparison among studies provides insights that have not been made explicit.
    JEL: M41
    Date: 2008–04–23
  3. By: Jara-Bertin, Mauricio; López-Iturriaga, Félix J.
    Abstract: This paper analyzes the influence of large shareholders on earnings management in family-owned firms using a sample of firms from 11 European countries. We consider how the contest to the control of the largest shareholder and the existence of a controlling coalition in family-owned firms affect earnings management in these firms. We find that increased contestability of the control of the largest shareholder reduces earnings management in family-owned firms. Our results also show that in firms in which the largest shareholder is a family, a second or third family shareholder increases discretionary accruals.
    Keywords: corporate control; discretionary accruals; earnings management; family firms
    JEL: M41 G32
    Date: 2008–07–11
  4. By: Amedeo Spadaro
    Abstract: Drawing from the formal setting of the optimal tax theory (Mirrlees 1971), the paper identifies the level of Rawlsianism of some European social planners starting from the observation of real data and redistribution systems and uses it to build a metric that allows measuring the degree of (dis)similarity of the redistribution systems analyzed. It must be considered as a contribution to the comparative research on the structure and typology of the Welfare State. In particular we consider the optimal taxation model that combines both intensive and extensive margins of labor supply, as suggested by Saez (2002) in order to assess the degree of decommodification of seven European welfare systems. We recover the shape of the social welfare function implicit in tax-benefit systems by inverting the model on actual effective tax rates, as if existing systems were optimal according to some Mirrleesian social planner. Actual distributions of incomes before and after redistribution are obtained using a pan-European tax-benefit microsimulation model. Results are discussed in the light of standard classifications of welfare regimes in Europe. There appears to be a clear coincidence of high decommodification willingness and high Rawlsianism in the Scandinavian, social-democratically influenced welfare states (Denmark). There is an equally clear coincidence of low decommodification willingness and utilitarianism in the <i>Anglo-Saxon liberal</i> model (UK) and in the <i>Southern European</i> welfare states (Italy and Spain). Finally, the <i>Continental European</i> countries (Finland, Germany and France) group closely together in the middle of the scale, as corporatist and etatist.
    Date: 2008
  5. By: Tobias Uske (Max Planck Institute for Economics, Strategic Interaction Group, Jena.)
    Abstract: As firms implement tournament bonus reward schemes, mainly the idea is to introduce competition amongst their agents in the order to promote their performance. Tournaments in which agents compete for a bonus by investing effort, are frequently applied, e.g., in development races, political contests, and promotion tournaments. The fallibility of evaluation processes and the inherent variability of competitors' effort choices introduce uncertainty to tournament settings with respect to the outcome. If heterogeneous agents interact in such a setting, experimental results suggest that increasing uncertainty leads to more excess of effort if compared to optimality (Avrahami et al., 2007). This paper experimentally investigates whether the observed overperformance in the tournament is similar to overbidding in auctions. Furthermore, it disentangles two possible sources of over-performance: either biased responses to, or wrong beliefs of, opponents' effort choices. We show that over-performance can be explained by "tournament fever": agents overreact to own beliefs, if compared to best responses, and mainly overestimate their opponents. Leveling uncertainty influences both overshooting and the precision of beliefs.
    Keywords: uncertainty, incentive effects, tournament fever, auction fever, all-pay auction
    JEL: J33 M42 M52 M55
    Date: 2008–07–16

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