|
on Accounting and Auditing |
| By: | Sanders Shaffer |
| Abstract: | There is a popular belief that the confluence of bank capital rules and fair value accounting helped trigger the recent financial crisis. The claim is that questionable valuations of long term investments based on prices obtained from illiquid markets created a pro-cyclical effect whereby mark to market adjustments reduced regulatory capital forcing banks to sell off investments which further depressed prices. This ultimately led to bank instability and the credit effects that reached a peak late in 2008. This paper analyzes a sample of large banks to attempt to measure the strength of the link between fair value accounting, regulatory capital rules, pro-cyclicality and financial contagion. The focus is on large banks because they value a significant portion of their balance sheets using fair value. They also hold investment portfolios that contain illiquid assets in large enough volumes to possibly affect the market in a pro-cyclical fashion. The analysis is based on a review of recent historical financial data. The analysis does not reveal a clear link for most banks in the sample, but rather suggests that there may have been other more significant factors putting stress on bank regulatory capital. |
| Keywords: | Global financial crisis ; Bank capital ; Banks and banking - Accounting |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbqu:qau10-1&r=acc |
| By: | Karol Marek Klimczak (Kozminski University - Kozminski University); Grzegorz Szafrański (University of Lodz - University of Lodz) |
| Abstract: | In this paper, we extend comparative value relevance research by examining patterns in the value relevance of accounting numbers as a function of the month in which market values are observed. We stimate the residual income model on a sample of stock-exchange listed companies from Germany and France and find dramatically divergent patterns of fit. In France, accounting numbers have strong relevance for market valuation after publication of annual reports in February or March. In Germany, accounting numbers have stronger relevance during the fiscal year. We term the two effects forecast and coincident relevance, respectively. We argue that the divergence in patterns of fit may be a result of limited interim reporting in France before adoption of IFRS. |
| Keywords: | value relevance, accounting earnings, equity valuation, methodology |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00481073_v1&r=acc |
| By: | Olivier Jeanne (Peterson Institute for International Economics); Anton Korinek |
| Abstract: | This paper analyzes prudential controls on capital flows to emerging markets from the perspective of a Pigouvian tax that addresses externalities associated with the deleveraging cycle. It presents a model in which restricting capital inflows during boom times reduces the potential outflows during busts. This mitigates the feedback effects of deleveraging episodes, when tightening financial constraints on borrowers and collapsing prices for collateral assets have mutually reinforcing effects. In our model, capital controls reduce macroeconomic volatility and increase standard measures of consumer welfare. |
| Keywords: | capital flows, deleveraging episodes, emerging market economies, Pigouvian tax |
| JEL: | F3 F32 F34 G15 G18 H21 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp10-5&r=acc |
| By: | Makoto Nakajima |
| Abstract: | This paper quantitatively investigates the optimal capital income taxation in the general equilibrium overlapping generations model, which incorporates characteristics of housing and the U.S. preferential tax treatment for owner-occupied housing. Housing tax policy is found to have a substantial effect on how capital income should be taxed. Given the U.S. preferential tax treatment for owner-occupied housing, the optimal capital income tax rate is close to zero, contrary to the high optimal capital income tax rate implied by models without housing. A lower capital income tax rate implies a narrowed tax wedge between housing and non-housing capital, which indirectly nullifies the subsidies (taxes) for homeowners (renters) and corrects the over-investment to housing. |
| Keywords: | Taxation ; Housing |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:10-11&r=acc |
| By: | Ugo Colombino; Marilena Locatelli; Edlira Narazani; Cathal O’Donoghue |
| Abstract: | We develop and estimate a microeconometric model of household labour supply in four European countries representative of different economies and welfare policy regimes: Denmark, Italy, Portugal and the United Kingdom. We then simulate, under the constraint of constant total net tax revenue (fiscal neutrality), the effects of various hypothetical tax-transfer reforms which include alternative versions of a Basic Income policy: Guaranteed Minimum Income, Work Fare, Participation Basic Income and Universal Basic Income. We produce indexes and criteria according to which the reforms can be ranked and compared to the current tax-transfer systems. The exercise can be considered as one of empirical optimal taxation, where the optimization problem is solved computationally rather than analytically. It turns out that many versions of the Basic Income policies would be superior to the current system. The most successful policies are those involving non means-tested versions of basic income (Universal or Participation Basic Income) and adopting progressive tax-rules. If – besides the fiscal neutrality constraint – also other constraints are considered, such as the implied top marginal top tax rate or the effect on female labour supply, the picture changes: unconditional policies remain optimal and feasible in Denmark and the UK; instead in Italy and Portugal universal policies appear to be too costly in terms of implied top marginal tax rates and in terms of adverse effects on female participation, and conditional policies such as Work-Fare, emerge as more desirable. |
| Keywords: | Minimum Guaranteed Income, Work Fare, Participation Basic Income, Universal Basic Income, Models of Labour Supply, Tax Reforms, Welfare Evaluation, Optimal Taxation |
| JEL: | C25 H24 H31 I38 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:wpc:wplist:wp04_10&r=acc |
| By: | Roy Bahl (Andrew Young School of Policy Studies, Georgia State University); Musharraf Cyan (International Studies Program. Andrew Young School of Policy Studies, Georgia State University) |
| Abstract: | The goal in this paper is to build on the existing literature to better explain the tax assignment choices made by countries in different economic circumstances. In particular, we explain why tax assignment to subnational governments is five times greater in industrial than developing countries, even when adjustment is made for differences in income level. Following on from the theory of tax assignment, we consider four arguments for this disparity. First, electoral regimes are not in place for the accountability gains to be captured. Second, tax decentralization may result in unacceptable fiscal disparities, and third, tax administration costs are higher for subnational governments and there is not enough incentive to take steps to lower them. Finally, we find empirical evidence to reject the hypothesis that giving more discretionary powers to subnational governments in developing countries will lead to a crowding out of central revenues, but find the opposite in the case of industrial countries. |
| Keywords: | Tax Assignment, tax administration , fiscal disparities, theory of tax assignment |
| Date: | 2010–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper1004&r=acc |
| By: | Simon Alcouffe (ESC Toulouse - Ecole Supérieure de commerce de Toulouse); Nicolas Berland (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris Dauphine - Paris IX); Benjamin Dreveton (CEREGE - IAE de Poitiers); Moez Essid (GRIISG - ISG paris) |
| Abstract: | This paper draws on Environmental Management Accounting (EMA) literature and cost driver theory to study the nature and role of environmental cost drivers. More specifically, two types of operations related to environmental protection were empirically examined: the removal of asbestos from buildings and soil remediation. Findings from a series of case studies are presented and discussed. The paper contributes to existing literature in three ways: (1) by testing the adaptability of cost drivers typologies in a non-traditional, nonindustrial setting (2) by proposing a more dynamic vision of the cost of social and environmental responsibility of the firm, and (3) by shedding light on the complex interrelationships of environmental cost drivers. |
| Keywords: | Environmental Management Accounting, Cost Driver, Social & Environmental Responsibility. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00479538_v1&r=acc |
| By: | Martin Fochmann (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Dirk Kiesewetter (Faculty of Economics and Management, JUlius-Maximilians University Würzburg); Abdolkarim Sadrieh (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg) |
| Abstract: | We use a laboratory experiment to study the extent to which investors’ choices are affected by limited loss deduction in income taxation. We first compare investment behavior in the no tax baseline to a tax control setting, in which the income from investments is taxed. We find that investors significantly reduce their risk-taking as predicted by theory. Next we compare the baseline investment choices to choices under three different types of income taxation. We observe that risk-taking is significantly increased with partial and with capped loss deduction, but is unaffected by a tax system that allows no loss deduction. Since in all these treatments the after tax outcomes of the prospects were identical, we conjecture that investors have a positively biased perception of partial and capped loss deduction that promotes their willingness to take risks. |
| Keywords: | risk-taking behavior, distorting taxation, tax perception |
| JEL: | C91 D14 H24 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:mag:wpaper:100004&r=acc |