nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2013‒02‒08
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Influence of Country- and Firm-Level Governance on Financial Reporting Quality: Revisiting the Evidence By Pierre Bonetti; Antonio Parbonetti; Michel Magnan
  2. Labor Income Responds Differently to Income-Tax and Payroll-Tax Reforms By Etienne Lehmann; François Marical; Laurence Rioux
  3. Elections and the structure of taxation in developing countries. By Ehrhart, H.
  4. Tax and Taxable Capacity: Ireland in Comparative Perspective By Callan Tim; Savage Michael
  5. Incentive Effects of Inheritances and Optimal Estate Taxation By Wojciech Kopczuk
  6. Politiques fiscales optimales pour les bas revenus et principe de compensation By Laurence Jacquet; Dirk Van de gaer
  7. Perceptions of unreported economic activities in Baltic Firms. Individualistic and non-individualistic motives By Jaanika Meriküll; Tairi Rõõm; Karsten Staehr
  8. Banks’ Capital Buffer, Risk and Performance in the Canadian Banking System: Impact of Business Cycles and Regulatory Changes By Guidara, Alaa; Lai, Van Son; Soumaré, Issouf; Tchana Tchana, Fulbert

  1. By: Pierre Bonetti; Antonio Parbonetti; Michel Magnan
    Abstract: Using a large sample of European firms that mandatorily adopted IFRS, this paper assesses how firm-level governance, as proxied by board attributes, and country-level enforcement interplay in affecting financial reporting quality. Financial reporting quality is assumed to have three dimensions: earnings informativeness, accruals management, and real earnings management. Three key findings emerge from our analyses. First, IFRS adoption per se does not seem to affect financial reporting quality. Second, in countries characterized by weak enforcement, strong board-level monitoring appears to enhance financial reporting quality, thus suggesting a substitutive effect between firm- and country-level governance. Third, in countries characterized by strong enforcement, firms with strong board-level monitoring exhibit a higher level of financial reporting quality than firms with weak board-level monitoring, thus suggesting that country- and firm-level governance are complementary. Overall, our findings help bridge the gap in the debate about the effects of country- and firm-level governance on the quality of financial reporting and provide further nuance on prior IFRS adoption research. <P>Depuis quelques années, le rôle et l’importance relative de la gouvernance au niveau organisationnel (entreprise) et de la gouvernance au niveau institutionnel (pays) sur plusieurs décisions et pratiques organisationnelles font l’objet d’un débat animé. Une des facettes de ce débat est l’impact des deux niveaux de gouvernance sur la crédibilité des résultats financiers présentés par les entreprises. La question est d’importance car elle sous-tend plusieurs interventions réglementaires en matière de gouvernance. Nous étudions cette problématique au moyen d’un échantillon comprenant un grand nombre d’entreprises européennes ayant adopté les normes comptables internationales (ou, International Financial Reporting Standards, IFRS), ce qui assure une certaine comparabilité des données. La gouvernance organisationnelle est représentée par différents attributs du conseil d’administration alors que la gouvernance institutionnelle est fonction du contexte d’intervention réglementaire et judiciaire dans un pays. La crédibilité des résultats financiers est présumée comporter trois dimensions : sont-ils informatifs, libres de manipulations comptables systématiques et non affectés par des décisions de gestion non justifiées? Trois résultats principaux se dégagent de nos analyses. Premièrement, l’adoption d’un nouveau référentiel comptable qui est présumé être plus rigoureux (IFRS) n’a pas d’incidence sur la crédibilité des résultats financiers. Deuxièmement, les entreprises de pays caractérisés par une gouvernance institutionnelle faible mais dotés d’un conseil d’administration solide voient la crédibilité de leurs résultats financiers s’améliorer suite à l’adoption obligatoire du référentiel IFRS. Par conséquent, pour les entreprises de ces pays, la gouvernance organisationnelle se substitue aux carences de la gouvernance institutionnelle. Finalement, on observe une amélioration de la crédibilité des résultats financiers rapportés par les entreprises dotées d’un conseil d’administration solide et en provenance de pays ayant une gouvernance institutionnelle rigoureuse, ce qui suggère que les deux niveaux de gouvernance sont complémentaires dans ce cas.
    Keywords: IFRS; Corporate governance, Legal enforcement, financial reporting quality,
    JEL: G14 G15 G18 G34 M41
    Date: 2013–01–01
  2. By: Etienne Lehmann (CREST); François Marical (INSEE); Laurence Rioux (CREST(INSEE))
    Abstract: We estimate the responses of gross labor income with respect to marginal and average net-of-tax rates in France over the period 2003-2006. We exploit a series of reforms to the income-tax and payroll-tax schedules affecting individuals who earn less than twice the minimum wage. Our estimate for the elasticity of gross labor income with respect to the marginal net-of-income-tax rate is around 0.2, while we find no response to the marginal net-of-payroll-tax rate. The elasticity with respect to the average net-of-tax rate is not significant for the income-tax schedule, while it is close to -1 for the payroll-tax schedule. A plausible explanation is the existence of significant labor supply responses to the income-tax schedule, combined with sticky posted wages (i.e., the gross labor income minus payroll taxes divided by hours worked). Finally, the effect of the net-of-income-tax rate seems to be driven by participation decisions, in particular those of married women.
    Keywords: Labor income, Payroll tax, Income tax
    JEL: H24 H31 J22 J38
    Date: 2012–10
  3. By: Ehrhart, H.
    Abstract: This article analyses the impact of the electoral calendar on the composition of tax revenue (direct versus indirect taxes). It thus represents an extension of traditional political budget-cycle analyses assessing the impact of elections on overall revenue. Panel data from 56 developing countries over the 1980-2006 period reveals a clear pattern of electorally-related policy interventions. Taking the potential endogeneity of election timing into account, we find robust evidence of lower indirect taxes being applied by incumbent governments in the period just prior to an election. Indirect tax revenue in election years is estimated to be 0.3 GDP percentage points lower than in other years, corresponding to a fall of about 3.4% of the average figure in the sample countries, while there is no such relationship with direct tax revenue.
    Keywords: Political budget cycles, Elections, Taxation, Developing countries.
    JEL: D72 E62 O10
    Date: 2013
  4. By: Callan Tim; Savage Michael
    Keywords: taxes/Ireland/Comparative/qec
    Date: 2013–01
  5. By: Wojciech Kopczuk
    Abstract: I consider nonlinear taxation of income and bequests with a joy-of-giving bequest motive and explicitly characterize the estate tax rate structure that maximizes social planner's welfare function. The solution trades off correction of externality from giving and discouraging effort of children due to income effect generated by bequests. The analysis shows that optimality of a positive tax on bequests in this context rests on the strength of the effect of bequests on behavior of future generations, and suggests that inheritance rather than estate tax is better suited to implement the corresponding policy.
    JEL: E21 H2
    Date: 2013–02
  6. By: Laurence Jacquet; Dirk Van de gaer (THEMA, Universite de Cergy-Pontoise and THEMA; Universiteit Gent et CORE)
    Abstract: We consider an economy in which agents di¤er in terms of productivity (that may be either high or low) as well as in their preferences for labour. Individuals decide whether or not they enter the labour force. In this context and under asymmetric information, the optimal tax schedules derived under the Egalitarian Equivalence criterion (Fleurbaey et Maniquet [2005, 2006]) always satisfy the compensation principle (for distinct productivity levels). Under the criterion of Roemer [1993, 1998] and the weighted maximin à la Boadway et al. [2002], the optimal tax schedules may satisfy the compensation principle while the standard criteria in the optimal taxation literature fail to do so. Numerical simulations illustrate our analytical results and highlight how the parameters in the model affect the participation tax.
    Keywords: optimal taxation, compensation principle, heterogeneous preferences for labour
    JEL: H21 D63
    Date: 2013
  7. By: Jaanika Meriküll; Tairi Rõõm; Karsten Staehr
    Abstract: This paper analyses managerial dishonesty in the form of economic activity not reported to the authorities. We employ data from a survey of Baltic firm managers, who were asked to assess the prevalence of unreported profits, employment and wages in their industry and to give their views on a range of questions related to various reasons for dishonest behaviour. Unreported economic activities are perceived to be widespread, although their extent and composition vary across the three countries. We employ a principal component analysis of the survey answers and identify three clusters capturing both individualistic and nonindividualistic motives for dishonest behaviour: 1) reciprocity towards government; 2) rational choice related motives; and 3) norms towards society as proxied by the tolerance of illegal activities. The econometric analysis indicates that all three motives are related to perceptions of unreported activities in the Baltic countries
    Keywords: unreported economic activity, tax evasion, tax morale, norms, governance, social coherence, Baltic countries
    JEL: E61 F36 F41
    Date: 2013–02–04
  8. By: Guidara, Alaa; Lai, Van Son; Soumaré, Issouf; Tchana Tchana, Fulbert
    Abstract: Using quarterly financial statements and stock market data from 1982 to 2010 for the six largest Canadian chartered banks, this paper documents positive co-movement between Canadian banks’ capital buffer and business cycles. The adoption of Basel Accords and the balance sheet leverage cap imposed by Canadian banking regulations did not change this cyclical behaviour of Canadian bank capital. We find Canadian banks to be well-capitalized and that they hold a larger capital buffer in expansion than in recession, which may explain how they weathered the recent subprime financial crisis so well. This evidence that Canadian banks ride the business and regulatory periods underscores the appropriateness of a both micro- and a macro-prudential “through-the-cycle” approach to capital adequacy as advocated in the proposed Basel III framework to strengthen the resilience of the banking sector.
    Keywords: Capital Buffer; Risk; Performance; Basel Accords; Regulation; Business Cycles; Canadian Banks
    JEL: G28 G21
    Date: 2013–01–31

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