nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2010‒01‒10
six papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Governance and disclosure of the Firm as an Enterprise Entity By Yuri Biondi
  2. The struggle for tax reform in Maine, 2003-2009 By Richard Woodbury
  3. Retrospective Capital Gains taxation in the real world By Francesco Menoncin; Paolo Panteghini
  4. The Personal Income Tax Structure: Theory and Policy By John Creedy
  5. State business tax incentives: examining evidence of their effectiveness By Jennifer Weiner
  6. Balance Sheet Interlinkages and Macro-Financial Risk Analysis in the Euro Area. By Olli Castrén; Ilja Kristian Kavonius

  1. By: Yuri Biondi (CERAG - Centre d'études et de recherches appliquées a la gestion - CNRS : UMR5820 - Université Pierre Mendès-France - Grenoble II, PREG - Pole de recherche en économie et gestion - CNRS : UMR7176 - Polytechnique - X)
    Abstract: Recent financial crises and scandals have focused attention on the system of governance and disclosure in a way many may never have imagined and few welcomed. Not only do reforms appear to be necessary to protect shareholders as well as other stakeholders, but also to develop a different understanding of the relationship between the financial markets and the business firm. This paper criticises two daydreams concerning the firm - as a 'black-box' or an 'owner-entrepreneur' - and contrasts them to the idea of the firm as an enterprise entity. The latter implies a comprehensive approach that integrates economics, accounting, and law. The firm is then understood as a managed dynamic system, characterized by different structures of production: institutional, organizational or epistemic (related to the place and role of institutions, internal organization, and knowledge within the firm). Accordingly, the accounting system is an integral part of this framework, one that demonstrates the joint implications of economic, accounting, and legal matters within the firm. In a business affair fraught with unfolding changes coupled with asymmetries of resources, access, control and information, the accounting system copes with the economic and monetary processes generated by the whole enterprise, by representing the enterprise capital (assets and liabilities) and income (revenues and costs). In this way, the accounting system allows this special process to exist and function autonomously from (and interactively with) financial holding of shareholders' claims traded on the Share Exchange.
    Keywords: corporate governance; financial reporting and disclosure; accounting; theory of the firm; performance measurement; shareholders' equity interest
    Date: 2009–09–18
  2. By: Richard Woodbury
    Abstract: Tax reform has been among the most prominent topics of public policy discussion in Maine in recent history. The current tax system has been described as antiquated, imbalanced, burdensome, unfair, uncompetitive, archaic, and volatile. Over the 2003-2009 period, many reform proposals were advanced; and some reforms were enacted, including a significant restructuring of the income tax system in 2009. This paper lays out the issues motivating tax reform efforts in Maine, provides a historical review of the tax reform struggle as it has unfolded, and offers a descriptive summary of the major initiatives advanced or enacted. Considerable attention is paid to the 2009 tax reform package, in the context of understanding tax reform issues more broadly.
    Keywords: Taxation - Maine
    Date: 2009
  3. By: Francesco Menoncin; Paolo Panteghini
    Abstract: In this article, we analyze Auerbach's (1991) proposal of a retrospective capital gains tax, which is equivalent to an accrual tax on an ex-ante basis. Using a continuous-time model with stochastic interest rates and serially correlated asset returns, we prove that such an equivalence still holds. This means that in a more realistic setting the realization-based systems requires no ad hoc adjustment for equivalence to hold.
    Date: 2009
  4. By: John Creedy
    Abstract: There is now a large and complex literature on optimal income taxation, within the context of second-best welfare economics. This paper considers the potential role of this analysis in the practical design of direct tax and transfer structures. It is stressed that few results are robust, even in simple models, in view of the important role played by alternative social welfare functions, the nature of the distribution of abilities and the preferences of individuals. In view of these negative results, it is suggested that a range of empirical tax analyses, capturing particular issues, can provide helpful guidance for policy analysts. Numerical illustrations are provided, paying attention to the role of a ‘top’ marginal tax rate applied to higher-income groups. In particular, behavioural microsimulation models can be used to examine marginal direct tax reform. Such models have the advantages of capturing the full extent of population heterogeneity and the complexity of the tax structure.
    Keywords: Personal income Tax Structure
    JEL: B3 B30 B31 D3 D30 D39 D6 D60 D69 P42 R23
    Date: 2009
  5. By: Jennifer Weiner
    Abstract: State governments commonly use business tax credits to promote economic development. Whether these incentives are successful at generating new economic activity - and whether they do so in a cost-effective manner - are important concerns, particularly in times of fiscal and economic stress. This paper explores the use and effectiveness of a selected group of incentives, namely tax credits geared toward capital investment, research and development, job creation, and film production. The paper examines the various credits offered by New England states and their structural features, and reviews and analyzes the available evidence on the effectiveness and cost-effectiveness of these types of incentives. The analysis reveals the challenges entailed in measuring the impact of business tax credits and the need for both analysts and policymakers to consider those challenges carefully when using existing studies to inform the tax credit debate.
    Keywords: Tax incentives ; Business tax ; Tax incentives - New England ; Business tax - New England
    Date: 2009
  6. By: Olli Castrén (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Ilja Kristian Kavonius (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: The financial crisis has highlighted the need for models that can identify counterparty risk exposures and shock transmission processes at the systemic level. We use the euro area financial accounts (flow of funds) data to construct a sector-level network of bilateral balance sheet exposures and show how local shocks can propagate throughout the network and affect the balance sheets in other, even seemingly remote, parts of the financial system. We then use the contingent claims approach to extend this accounting-based network of interlinked exposures to risk-based balance sheets which are sensitive to changes in leverage and asset volatility. We conclude that the bilateral cross-sector exposures in the euro area financial system constitute important channels through which local risk exposures and balance sheet dislocations can be transmitted, with the financial intermediaries playing a key role in the processes. High financial leverage and high asset volatility are found to increase a sector’s vulnerability to shocks and contagion. JEL Classification: C22, E01, E21, E44, F36, G01, G12, G14.
    Keywords: Balance sheet contagion, financial accounts, network models, contingent claims analysis, systemic risk, macro-prudential analysis.
    Date: 2009–12

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