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on Accounting and Auditing |
| By: | Pietola, Kyosti; Myyra, Sami; Pouta, Eija |
| Keywords: | capital gains, taxes, land, trade, fiscal effects, Agricultural Finance, Financial Economics, Land Economics/Use, |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:ags:mttfdp:50040&r=acc |
| By: | Ruud de Mooij (CPB Netherlands); Michael P. Devereux (Oxford University Centre for Business Taxation) |
| Abstract: | This paper explores the economic implications of an allowance for corporate equity (ACE), a comprehensive business income tax (CBIT) and a combination of the two in the EU. We illustrate the key trade-offs in designing ACE and CBIT in the presence of tax distortions at various decision margins of firms, such as its financial structure, investment, profit allocation and discrete location. Using an applied general equilibrium model for Europe, we quantitatively assess the effects of ACE, CBIT and combined reforms in EU countries. The results suggest that ACE is welfare improving as long as corporate tax rates are not used to cover the cost of base narrowing. CBIT typically reduces welfare by exacerbating marginal investment distortions. When governments adjust statutory corporate tax rates to balance their budget, however, CBIT reforms become more attractive while ACE reforms are welfare reducing in a number of countries. European coordination of reforms mitigates fiscal spillovers within the EU and renders ACE reforms more, and CBIT reforms less, attractive for welfare. A combination of ACE and CBIT reforms can be designed to be revenue neutral and welfare improving through smaller financial distortions. |
| Keywords: | European Union, corporate taxation |
| JEL: | H25 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:tax:taxpap:0017&r=acc |
| By: | Bottazzi, L.; Da Rin, M.; Hellmann, T. (Tilburg University, Center for Economic Research) |
| Abstract: | We examine the effect of trust on financial investment and contracting decisions in a micro-economic environment where trust is exogenous. Using hand-collected data on European venture capital, we show that the Eurobarometer measure of trust among nations significantly affects investment decisions. This holds even after controlling for investor and company fixed effects, geographic distance, information and transaction costs. The national identity of venture capital firms’ individual partners further contributes to the effect of trust. Education and work experience reduce the effect of trust but do not eliminate it. We also examine the relationship between trust and sophisticated contracts involving contingent control rights and find that, even after controlling for endogeneity, they are complements, not substitutes. |
| Keywords: | Venture Capital;Social Capital;Trust;Financial Contracts;Corporate Governance. |
| JEL: | G24 G34 K22 M13 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200943&r=acc |
| By: | Carlo Alberto Magni |
| Abstract: | In Magni [Eur. J. Operat. Res. 137 (2002) 206] I present some inconsistencies implicit in the net-present-value criterion, as currently used in finance. This paper shows that the standard use of CAPM for capital budgeting, based on disequilibrium values, is at odds with arbitrage theory, and that the corresponding CAPM-based NPV rule is meaningless even in the simplest case, because net present value is any number one wants it to be. Cognitively, this amounts to saying that the NPV procedure leaves decision makers subject to a framing bias; financially, this amounts to saying that additivity does not hold. De Reyck's [Eur. J. Operat. Res. 161 (2005) 499] objection to my thesis is invalid because he mistakes a project's expected rate of return for a project's cost of capital. De Reyck's Proposition, on the basis of which my thesis is criticized, leaves decision makers open to arbitrage losses, because it is an (admittedly interesting) reframing of the security market line and (as surprising as it might be) the use of the SML for project valuation is incompatible with the no-arbitrage principle. To use NPV and CAPM for capital budgeting is not a good idea. |
| Date: | 2009–05–27 |
| URL: | http://d.repec.org/n?u=RePEc:col:000162:005546&r=acc |
| By: | Jianjun Miao (Department of Economics, Boston University) |
| Abstract: | This paper presents an analytically tractable continuous-time general equilibrium model with investment irreversibility and fixed adjustment costs. In the model, there is a continuum of firms that are subject to idiosyncratic shocks to capital. Although the presence of investment frictions lowers consumer welfare, it may raise or reduce the long-run average capital stock, depending on the degree of idiosyncratic uncertainty. An increase in this uncertainty may raise equilibrium aggregate capital, but reduce welfare. An unexpected permanent change in the corporate income tax rate affects the investment trigger and target values, and hence the size and rate of capital adjustment. Following this tax policy, the percentage changes in equilibrium quantities are larger when fixed adjustment costs are larger. These changes are significantly smaller in a general equilibrium model than in a partial equilibrium model. |
| Keywords: | irreversibility, fixed costs, heterogeneity, tax policy, general equilibrium |
| JEL: | D92 E22 E62 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:bos:iedwpr:dp-181&r=acc |