nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2010‒02‒27
four papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Transparency, Liquidity, and Valuation: International Evidence By Lang, Mark; Lins, Karl V.; Maffett, Mark
  2. Audit the Federal Reserve? By William Barnett; ;
  3. Tax Devolution and Grant Distribution to States in India Analysis and Roadmap for Alternatives By R Mohan; Shyjan D
  4. Understanding the compliance costs of benefits and tax credits. By Bennett, F.; Brewer, M.; Shaw, J.

  1. By: Lang, Mark (University of North Carolina, Chapel Hill); Lins, Karl V. (University of Utah); Maffett, Mark (University of North Carolina, Chapel Hill)
    Abstract: We examine the relation between transparency, stock market liquidity, and valuation for a global sample of firms. Following the prior literature, we argue that transaction costs will be higher and investors will be less willing to transact if they perceive significant issues with respect to transparency, particularly in international settings where potential information effects are more pronounced Consistent with expectations, we document lower transaction costs and greater liquidity (as measured by lower bid-ask spreads and fewer zero return days) when transparency is likely to be higher (as measured by less evidence of earnings management, better accounting standards, higher quality auditors, more analyst following and more accurate analyst forecasts). We also find evidence that the relation between transparency and liquidity is more pronounced when country-level investor protections and disclosure requirements are poor, suggesting that firm-level transparency matters most when country-level institutions are weak. Finally, we provide evidence that increased liquidity is associated with lower implied cost of capital based on an analyst-forecast-based valuation model, and with higher valuation as measured by Tobin's Q. Magnitudes are substantial, with an interquartile increase in transparency in a low investor protection country associated with a decrease in bid-ask spread from 1.9% to 0.9% and a decrease in cost of capital of 62 basis points.
    Date: 2009–01
  2. By: William Barnett (Department of Economics, The University of Kansas); ;
    Abstract: An independent institute for monetary statistics is needed in the United States, says William Barnett in paper to appear in the journal, Central Banking. Expanded Congressional audit would be a second best alternative, but would not fully address the needs and would carry risks.
    Keywords: Central banking, Federal Reserve, data institute, monetary aggregation, monetary policy, audit, GAO.
    JEL: C82 E01 E41 E50
    Date: 2010–01
  3. By: R Mohan; Shyjan D
    Abstract: The paper attempts to analyse the impact of devolution of taxes and distribution grants by the Centre to the States in India by taking fourteen major States for the time period 1980-81 to 2006-07. The study focuses on the impact of inter- State distribution of Central grants and taxes. Analysis reveals that formula based tax devolution has been more equalising than grants. Study finds that there is need to explore alternative mechanisms. [WP 419].
    Keywords: India, vertical and horizontal inmalance, finance commission, Gross Domestic Product, GDP, state, GSDP, service tax, indirect taxes, direct, central excise, revenue, devolution, taxes, grants, centre, states, distribution, taxes, devolution,
    Date: 2010
  4. By: Bennett, F.; Brewer, M.; Shaw, J.
    Abstract: This report describes a scoping study to understand more about the nature of the 'costs of compliance' that claimants of social security benefits and (personal) tax credits incur, and discusses possible ways of measuring such costs. 'Costs of compliance' refers to the costs - time, money and psychological costs - that are imposed on applicants for, and recipients of, benefits and tax credits and on others by meeting all the various requirements placed on them by social security and tax credit law and statutory authorities. Our main purpose in this report is to make the case for taking compliance costs into account in considering the impact of, and changes to, benefits and tax credits. The study aimed to investigate the extent to which the principles underlying methods of establishing 'costs of compliance' in other areas can be applied to applicants for, and recipients of, benefits and tax credits. These existing methods include valuing individuals' and companies' administrative costs of complying with the tax authorities; valuing companies' costs in complying with government regulations; and estimating the time spent by individuals in complying with government regulations of various kinds. But we also think it is important for governments to consider claimants' own perceptions and priorities in terms of the 'costs of compliance'. Currently, the government recommends that cost-benefit analysis should be used when assessing the impact of potential policy changes and it produces guidance for departments on how to put this into practice. New impact assessments have been introduced recently, which, in principle, should take into account the monetary value of all the effects of changes, including allocating a value to non-market items such as people's time. This kind of assessment should therefore include analysis of the 'costs of compliance' for benefits and tax credits claimants. In practice, however, impact assessments do not usually include such exercises. It is important to know about the scale and distribution of the compliance costs of benefits and tax credits, as well as taxes, for several reasons. Time spent by recipients fulfilling their obligations cannot be spent engaged in other activities; a more rounded measure of the productivity of the benefits and tax credits system would include such costs; and we could understand more about the reasons behind non-take-up of entitlements. There could be advantages, too, in terms of improving citizens' relationship with government. A concern about the 'burdens on citizens' imposed by their interactions with government is now moving quickly up the policy agenda in the UK, and a few attempts to measure claimants' compliance costs were initiated whilst this scoping study was being undertaken. Within the European Union, member states have also begun to exchange information and experiences about reducing burdens on citizens more generally. The Netherlands has developed both its policies and its measurement methods further than many other countries. This is a scoping study and does not set out to measure the costs of compliance incurred by benefits and tax credits claimants. Instead, it explores the nature of the costs of compliance for claimants of benefits and tax credits; assesses whether such costs can be measured and, if so, to what extent; and discusses whether impact assessments of policy changes could include such measurements. We also hope that this report will act as a catalyst for the further development of these techniques to improve policy assessment in the benefits and tax credits systems.
    Date: 2009–07

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