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on Accounting and Auditing |
| By: | Stefan Lutz (University of Manchester, UK; Universidad Complutense de Madrid, Spain; ICER, Torino, Italy; I.R.E.F., Luxembourg) |
| Abstract: | Important determinants of multinational firms’ choice of location include, besides resource cost and infrastructure, the taxation regime through its effects on international pricing and profits. This paper investigates the effects of tax rates on firms’ profits and financing decisions by analyzing a panel of several hundred thousand European firms for the years 1985 to 2010. Results indicate that taxation has a negative effect on overall firm profits but not on returns on shareholder funds. This is consistent with the observed positive effect of corporate taxation rates on the gearing ratio, i.e. the higher corporate tax rates in a particular jurisdiction the lower the share of equity financing of firms residing in that jurisdiction. This may indicate that high-tax jurisdictions deter valuable investment by multinational enterprises because they provide incentives to locate value-driving business parts requiring more equity financing elsewhere. |
| Keywords: | MNE, DCF, Capital structure, Corporate income tax, Transfer pricing. |
| JEL: | G0 H3 F2 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:ucm:doicae:1304&r=acc |
| By: | Erik P.M. Vermeulen |
| Abstract: | Investor confidence in financial markets depends in large part on the existence of an accurate disclosure regime that provides transparency in the beneficial ownership and control structures of publicly listed companies. This is particularly true for corporate governance systems that are characterised by concentrated ownership. On the one hand, large investors with significant voting and cash-flow rights may encourage long-term growth and firm performance. On the other hand, however, controlling beneficial owners with large voting blocks may have incentives to divert corporate assets and opportunities for personal gain at the expense of minority investors.<P>The paper focuses particularly on the misuse of corporate vehicles, which arguably poses a major challenge to good corporate governance. Stakeholder rights (e.g. employees and creditors) cannot be properly exercised if ultimate decision- be identified. The accountability of the board may also be seriously endangered if stakeholders and the general public are unaware of decision-making and ultimate control structures. Finally, regulators and supervisory agencies have a strong interest in knowing beneficial owners – in order to determine the origin of investment flows, to prevent money laundering and tax evasion and to settle issues of corporate accountability. |
| Keywords: | shareholders, corporate governance, beneficial ownership, control-enhancing mechanisms, disclosure, inside blockholders, money laundering, outside blockholders, private enforcement, public enforcement |
| JEL: | G30 G32 K22 K42 |
| Date: | 2013–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:oec:dafaae:7-en&r=acc |
| By: | Marc Daumas (PROMES - Laboratoire Procédés, Matériaux et Energie Solaire - CNRS : UPR8521, ASR - Architecture, Systèmes et Réseaux (2010-2012) - CNRS : GDR725) |
| Abstract: | Cloud computing probably carries disruptive innovations that will change our future in many ways. We explore in this article how R&D Tax Credit changes the cost metrics of cloud computing with short- and long-term effects of its future developments and acceptance as a new key technology. Some of the situations described here may be in effect or arise in some other countries but in-depth analysis of legal texts and practices is necessary to identify them. The comparisons in this article are limited to bare costs. I do not propose adjustments or my opinion to policy makers in order to remain on a scientific level. Yet we go as far as possible as long as we remain in the intents of present laws and regulations. |
| Date: | 2013–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00776035&r=acc |
| By: | John Vickers |
| Abstract: | Where do we stand, five years on from the start of the crisis, on progress towards banking reform? Major advances have been made, but a lot of unfinished business remains, notably on structural reform of banks. Following a stock-take of current reform initiatives, the paper reviews some economics of public policy towards banks, starting with the rationale for deposit guarantees and lender-of-last-resort support but concentrating on why governments feel compelled to provide solvency support in crisis. It then covers the economics of capital requirements – and loss-absorbency more generally – and examines why such regulation is a better approach than taxation to address systemic risk externalities, and why the public interest requires much more capital than banks would choose. The role of structural regulation in making banking systems safer is then analysed, in particular forms of separation between retail and investment banking such as ring-fencing (as in current UK reforms) and complete separation (as in the US before the repeal of Glass-Steagall). The paper concludes with some reflections on the wider European policy debate in the light of the Liikanen Report on structural reform. A central theme of the analysis is that banking reform needs a well-designed combination of policies towards loss-absorbency and structural reform. |
| Keywords: | Banking, bail-outs, capital requirements, deposit guarantees, Glass-Steagall, resolution, ring-fencing, structural reform, Volcker rule |
| JEL: | G21 G28 L51 |
| Date: | 2012–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:632&r=acc |
| By: | Stefano Puddu (Institute of economic research IRENE, Faculty of Economics, University of Neuchâtel, Switzerland) |
| Abstract: | The goal of this paper is to provide alternative approaches to generate indexes in order to assess banking distress. Specifically, we focus on two groups of indexes that are based on the signalling approach and on the zero in ated Poisson models. The results show that the indexes based on these approaches perform better than those constructed by using the variance-equal and the factor analysis methods. Specifically, they are better at capturing relevant events, signalling distress episodes and forecasting properties. The importance of this study is two-fold: first, we contribute extra information that can be useful for forecasting banking system soundness in the aim of preventing future financial crises; second we provide alternative methods for measuring banking distress. |
| Keywords: | Stress-banking indexes, Signalling approach, Limited dependent variable methods |
| JEL: | C16 C25 G21 G33 G34 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:irn:wpaper:13-02&r=acc |
| By: | Alford, Duncan (Asian Development Bank Institute) |
| Abstract: | This paper focuses on the relevance to emerging economies of three major financial reforms following the global financial crisis of 2007–2009: (1) the improved capital requirements intended to reduce the risk of bank failure (“Basel III”), (2) the improved recovery and resolution regimes for global banks, and (3) the development of supervisory colleges of cross-border financial institutions to improve supervisory cooperation and convergence. The paper also addresses the implications of these regulatory reforms for Asian emerging markets. |
| Keywords: | international financial reforms; capital standards; resolution regimes; supervisory colleges; emerging markets |
| JEL: | G20 G28 O16 |
| Date: | 2013–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0402&r=acc |
| By: | Stefan Thurner; Sebastian Poledna |
| Abstract: | Banks in the interbank network can not assess the true risks associated with lending to other banks in the network, unless they have full information on the riskiness of all the other banks. These risks can be estimated by using network metrics (for example DebtRank) of the interbank liability network which is available to Central Banks. With a simple agent based model we show that by increasing transparency by making the DebtRank of individual nodes (banks) visible to all nodes, and by imposing a simple incentive scheme, that reduces interbank borrowing from systemically risky nodes, the systemic risk in the financial network can be drastically reduced. This incentive scheme is an effective regulation mechanism, that does not reduce the efficiency of the financial network, but fosters a more homogeneous distribution of risk within the system in a self-organized critical way. We show that the reduction of systemic risk is to a large extent due to the massive reduction of cascading failures in the transparent system. An implementation of this minimal regulation scheme in real financial networks should be feasible from a technical point of view. |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1301.6115&r=acc |
| By: | Alexander Zimper (Department of Economics, University of Pretoria) |
| Abstract: | The Basel Committee on Banking Supervision sets the official confidence level at which a bank is supposed to absorb annual losses at 99.9%. However, due to an inconsistency between the notion of expected losses in the Vasicek model, on the one hand, and the practice of Basel regulation, on the other hand, actual confidence levels are likely to be lower. This paper calculates the minimal confidence levels which correspond to a worst case scenario in which a Basel-regulated bank holds capital against unexpected losses only. I argue that the probability of a bank failure is significantly higher than the official 0.1% if, firstly, the bank holds risky loans and if, secondly, the bank was previously affeected by substantial write-offs. |
| Keywords: | Banking Regulation, Probability of Bank Failure, Definition of Expected Losses, Financial Stability |
| JEL: | G18 G32 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:201305&r=acc |