nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2009‒08‒30
nine papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Multinational Capital Structure and Tax Competition By Matthias Wrede
  2. Investitiile imateriale si performantele IMM-urilor By Iacob, Constanta; Pirvu, Cerasela
  3. Protecting Directors and Officers from Liability Arising from Aggressive Earnings Management By M. Martin Boyer; Amandine Hanon
  4. Long-Run Impacts of Inflation Tax in the Presence of Maintenance Expenditures By Seiya Fujisaki; Kazuo Mino
  5. Optimal Marginal Income Tax Reforms: A Microsimulation Analysis By John Creedy; Nicolas Hérault
  6. Financial Development and Amplification By Hirano, Tomohiro
  7. A Microsimulation Approach to an Optimal Swedish Income Tax By Ericson, Peter; Flood, Lennart
  8. The capitalization of taxes in bond prices: Evidence from the market for Government of Canada bonds By Stuart Landon
  9. A Financial System Perspective on Japan's Experience in the Late 1980s By Masazumi Hattori; Hyun Song Shin; Wataru Takahashi

  1. By: Matthias Wrede (University of Marburg and CESifo, Am Plan 2, 35032 Marburg, Germany)
    Abstract: This paper analyzes tax competition when welfare maximizing jurisdictions levy source-based corporate taxes and multinational enterprises choose tax-efficient capital-to-debt ratios. Under separate accounting, multinationals shift debt from low-tax to high-tax countries. The Nash equilibrium of the tax competition game is characterized by underprovision of publicly provided goods. Under formula apportionment, the country-specific capital-to-debt ratio of a multinational's affiliate is independent of the jurisdiction's tax rate. Public good provision is either too large or too small. If the formula is predominately based on capital shares and if there is a positive debt externality there is clearly underprovision under formula apportionment.
    Keywords: Multinational enterprises, financial policy, profit shifting, corporate taxation, tax competition.
    JEL: H25 H42 H73
    Date: 2009
  2. By: Iacob, Constanta; Pirvu, Cerasela
    Abstract: Along time, the goal of intangible assets became very important for the activity and prosper¬ity of business. This matter is achieved as well as more and more the companies operate in a global economy which has as main base the digital revolution and information management. The increase of the immaterial investments percent requires evaluation and recognition criteria by knowledge, intelligence and human competence. But recently, the accounting standards were about to accord negligible atten¬tion or even totally ignored the appropriate modalities of report this category of assets. The accounting, obliged to bend to economic, financial and juridical logics, in a ,,Taylor" modality, presents an unreal image of the company economic life and particularly of investment activity. In a competitive environ¬ment, the reliability of future economic benefits, generated by investments, depends less on their material or immaterial nature and more on the characteristics of the market they operate on. These are just a few reflections which determined us to focus our attention to this thought-provoking domain of immaterial investments, appreciated as a potential for the company.
    Keywords: intangible assets immaterial investments competences intelligence knowledge competences potential
    JEL: M41 D24
    Date: 2009
  3. By: M. Martin Boyer; Amandine Hanon
    Abstract: A lingering topic in corporate governance is whether corporate directors should be protected against shareholder lawsuits and whether such protection reduces the incentives of directors to monitor appropriately the behaviour of corporate officers. To achieve this goal, we examine whether corporations whose corporate managers’ wealth is protected under a directors’ and officers’ liability insurance policy (D&O insurance hereafter) are more to report accounting results aggressively. Using discretionary accruals as our measure of accounting aggressiveness, the results in our paper suggest that the magnitude of discretionary accruals has no real impact on the demand for D&O insurance, be it on the decision to purchase insurance or on the amount of limit chosen. The positivity of discretionary accruals appears, however, to have an impact on the decision to purchase insurance. Surprisingly, although these insurance policies protect directors and officers in the event they make a “mistake” in their role as representatives of the company, directors do not seem to see this as an invitation to be a little less careful when overseeing the firm’s accounting practices. <P>Un sujet qui demeure d’actualité quand on pense à la gouvernance des entreprises est le niveau de protection auquel les dirigeants devraient avoir droit en cas de poursuite par les actionnaires. Pour atteindre ce but, nous examinons s’il y a un lien entre la gestion agressive des courus discrétionnaires et la demande d’assurance de la responsabilité civile des administrateurs et dirigeants d’entreprise (ARCAD ci-après). Nous trouvons dans la présente étude que la taille des courus ne semble avoir aucun impact sur la demande d’assurance, que ce soit le fait même d’avoir un contrat ou la limite de la police. Le fait que les courus soient positifs semble toutefois avoir un impact sur le fait que les entreprises possèdent une ARCAD ou non. Nous demeurons perplexes de voir que même si l’ARCAD protège les dirigeants contre le coût de poursuites au civile, ces mêmes dirigeants ne voient pas cela comme une invitation au laxisme dans la supervision des pratiques comptables des entreprises.
    Keywords: directors’ and officers’ liability insurance policy, aggressive accounting practices, earnings management , ARCAD, pratiques comptables agressives, résultats financiers de gestion.
    Date: 2009–08–01
  4. By: Seiya Fujisaki (Graduate School of Economics, Osaka University); Kazuo Mino (Institute of Economic Research, Kyoto University)
    Abstract: This paper examines the long-run impact of inflation tax in the context of a generalized Ak growth model in which the rate of capital depreciation is endogenously determined. We assume that the rate of capital depreciation positively depends on capital utilization rate and negatively depends on maintenance expenditures. Money is introduced via a cash-in-advance constraint that may apply to the maintenance expenditures as well as to consumption and investment spendings. We find that the long-run effects of inflation tax are more complex than those obtained in the monetary Ak growth model with a fixed capital depreciation rate. In particular, the relation between inflation and growth is highly sensitive to the specification of the capital depreciation technology as well as to the forms of cash-in-advance constraints.
    Keywords: maintenance expenditures, endogenous growth, inflation tax, cash-in-advance constraints
    JEL: E31 E52 O42
    Date: 2009–08
  5. By: John Creedy (Department of Economics, The University of Melbourne); Nicolas Hérault (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: Extensive research has shown that few robust results regarding the optimal tax structure are available. Moreover, the stylised models used in optimal tax analyses are not appropriate for practical policy advice. This paper proposes a method of examining optimal marginal income tax reforms using behavioural microsimulation models in which the full extent of population heterogeneity is represented along with all the details of highly complex tax and transfer systems. The approach is illustrated using the Australian microsimulation model MITTS. The results show that the marginal welfare changes for the Australian income tax structure are not symmetric with respect to increases and decreases in tax rates, largely because of the asymmetry in tax revenue changes arising from differential labour supply effects in different ranges of the income distribution. In addition, the extent of inequality aversion was found to play a much larger role in the determination of the optimal direction of rate changes than the form of the welfare metric or the specification of adult equivalence scales.
    Date: 2009–08
  6. By: Hirano, Tomohiro
    Abstract: This paper investigates theoretically how financial development affects the magnitude of financial amplification. Financial development yields two competing effects, balance sheet effects and shock cushioning effects. Depending on which of these forces dominates, we find that financial amplification initially increases with financial development and later falls down. Moreover, we examine the role of monetary policy to reduce financial amplification. We find that in the case of unexpected productivity shocks, money growth targeting dampens financial amplification by producing shock cushioning effects. On the other hand, inflation targeting exacerbates the shocks because under the policy, shock cushioning effects are not generated.
    Keywords: Financial development; Financial amplification; Balance sheet effects; Shock cushioning effects
    JEL: E32 E52 E44
    Date: 2009–08–23
  7. By: Ericson, Peter (Empirica); Flood, Lennart (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper follows the theory of optimal taxation and the goal is to identify a tax/benefit design that maximizes social welfare. A two stage process is proposed where the individuals preferred choice of leisure and consumption is solved in the first stage, and the second stage identifies the tax/benefit system that maximize the social welfare function. Our study deviates from the mainstream literature as the first stage is based on a static micro simulation model with behavioral responses. The behavioralresponses take two different forms and use two different types of models; first binary models that describe mobility in/out from non-work states such as old age pension, disability, unemployment, long term sickness, and second models that describe change in working hours and welfare participation. Compared to the current Swedish income tax, our results suggests that increased basic deduction and in-work tax credit in combination with a reduction of the progressive national taxes would increase welfare. We also find strong support for increased housing allowances. The reforms are financed by a tax based on the same tax base as the proportional municipal income tax.<p>
    Keywords: Micro simulation; tax-benefit system; in-work tax credit reform; optimal taxation
    JEL: C80 D31 H24
    Date: 2009–08–25
  8. By: Stuart Landon
    Abstract: This paper provides estimates of the extent to which corporate and personal income taxes are capitalized in bond prices. The methodology yields estimates of the degree of tax capitalization, rather than an implied tax rate. This makes it straightforward to identify the marginal investor and test for changes in tax capitalization. The empirical approach also makes it unnecessary to jointly estimate the degree of tax capitalization and the entire yield curve. Corporate taxes are found to have been fully capitalized in pre-tax Government of Canada bond yields during the period 1986-1993. Since 1994, taxes have not been capitalized in yields. These results are consistent with the existence of a marginal investor, but the identity of the marginal investor changed from a financial sector firm to a non-taxed entity in the early 1990s.
    Keywords: Tax capitalization; Bond yields.
    JEL: G12 H2
    Date: 2009–08–20
  9. By: Masazumi Hattori (Institute for Monetary and Economic Studies, Bank of Japan (E-mail:; Hyun Song Shin (Professor, Princeton University (E-mail: hsshin@; Wataru Takahashi (Director-General, Institute for Monetary and Economic Studies, Bank of Japan (E-mail:
    Abstract: This paper revisits the events of the 1980s bubble in Japan in light of the lessons learned from the subprime crisis in the United States. Our focus is on the role played by sectoral developments in the financial system in Japan. We highlight the transformation of a subset of non-financial firms (the large manufacturing firms) from being net debtors to the banks to becoming net creditors to the banks, thereby becoming part of the financial intermediary sector. In this way, large manufacturing firms in Japan played the role of surrogate wholesale banks that increased the overall supply of credit to the economy. When good borrowers already had credit and yet loose monetary conditions encouraged greater credit supply, credit availability to marginal borrowers and to real estate-related sectors increased. We discuss the role of market conditions and monetary policy in this development.
    Keywords: Balance sheet, Commitment, Credit supply, Financial liberalization, Financial system perspective, Japan, Subprime crisis
    JEL: E51 G21 G28 N22 N25
    Date: 2009–08

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