nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2013‒06‒30
five papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Dynamics of the Location of Firms – A Revisit of Home-Attachment under Tax Competition By Yutao Han; Patrice Pieretti; Benteng Zou
  2. Innovation activity and nancing constraints: evidence from Italy during the crises. By Brancati, Emanuele
  3. Shariah Governance: Challenges Ahead By Abdul Aziz, Ahmad Faizal
  4. The "emersion" effect: an ex post and ex ante social program evaluation on labor tax evasion in Italy By Edoardo Di Porto; Leandro Elia; Cristina Tealdi
  5. Real Asset Valuation under Imperfect Competition: Can We Forget About Market Fundamentals?. By Chaton, Corinne; Durand-Viel, Laure

  1. By: Yutao Han (CREA, Université de Luxembourg); Patrice Pieretti (CREA, Université de Luxembourg); Benteng Zou (CREA, Université de Luxembourg)
    Abstract: We revisit the investment home-bias situation of firms and extend the home attachment setting of Mansoorian and Myers (1993) and Ogura (2006) into a dynamic framework. We locate firms based on their home attachment preferences, which is also changing over time based on some updated spillover information. Some applications, in static and dynamic tax competition, are presented following our home-attachment principle.
    Keywords: Dynamic tax competition, Home attachment, Foreign direct investment-disinvestment
    JEL: C61 F21 H21
    Date: 2013
  2. By: Brancati, Emanuele
    Abstract: Financial frictions may represent a severe obstacle for firms' innovative activity. This paper shows the existence and quantifies the effect of binding financial constraints on the innovation propensity of Italian companies. Once provided a rich baseline specification for innovation, I analyze the impact of financial constraints by exploiting a survey-based direct measure, enriched with a credit-score-index estimated ad hoc on a representative sample of confidential local bank ratings. A recursive bivariate probit model is employed to estimate the probability of undertaking innovative projects conditional on the likelihood of facing financial constraints. This econometric strategy accounts for possible correlations between these two features. My results show firms that are more likely to suffer from financial problems to have a probability of innovation that is 34% lower than financially-sound companies. Furthermore, instrumenting innovation with R&D into the financial-status equation, I control for a feedback effect of the innovation propensity on the financial status. As predicted by economic theory, most dynamic firms are shown to suffer from greater financial problems. This in turn is reflected onto a stronger depressive effect of financial constraints on innovation (-42%). This impact is shown to be sizable only for those firms with a higher ex ante probability to innovate, not being driven by a sub-group of most distressed companies. Finally, the last section deepens the role of firm size in alleviating the effects of financial frictions on a breakdown of three definitions of innovation. Relevant differences are found, especially for product and process--innovations.
    Keywords: Innovation; firm performance; financial constraints; banks; ratings
    JEL: G21 L25 O31
    Date: 2013–01–05
  3. By: Abdul Aziz, Ahmad Faizal
    Abstract: Bank Negara Malaysia (BNM) had previously issued a number of statutory requirements in making the establishment of Shariah Committee (SC) of a bank mandatory via Islamic Banking Act 1983, Banking & Financial Institution Act 1989, Takaful Act 1984 and Central bank of Malaysia (Amendment) Act 2003. The establishment of SC is important as part of the governance of an Islamic Bank in order to assure the stakeholders that the Bank is doing its business in permissible manner as outlined by the Shariah. Despite the structure, there is still skepticism about the system mainly on the capacity and the capability of the SC as reported in previous publications. This paper shall identify challenges faced by the SC that had impaired their capacity and capability in achieving their objectives. Subsequently, this paper shall recommend alternative measures on issues highlighted in assisting the SC and Shariah Auditors in bridging the public expectations. This study confines to issues pertaining to Islamic Banks operating in Malaysia as published in relevant articles and the author’s personal encounter.
    Keywords: Islamic Finance, Shariah Governance, Shariah Committee, Shariah Audit
    JEL: G28
    Date: 2012–05
  4. By: Edoardo Di Porto (MEMOTEF, Department "Sapienza" University of Rome and EQUIPPE USTL/Lille); Leandro Elia (Institute for the Protection and Security of the Citizen European Commission-Joint Research Centre); Cristina Tealdi (IMT Lucca Institute for Advanced Studies)
    Abstract: We analyze how different policy interventions may incentive the transition of workers from the informal to the formal sector. We use Italian data over the period 1998-2008 to evaluate ex post whether the 2003 Italian labor market reform was able to reach the objective to reduce the share of shadow employment. Based on our empirical results, we develop an ex ante evaluation based on a search and matching model, á la Mortensen and Pissarides to determine the right combination of policy interventions which may be effective in generating a significant reduction in undeclared work together with an expansion of the formal sector. We find that in an economy where permanent and temporary contracts coexist, the combination of lower payroll taxes for permanent jobs and higher probability of being audited generates a compression of the informal sector, leaving unemployment unchanged. A similar result can be obtained through a reduction of the firing cost associated with permanent jobs, even though this causes temporary contracts to increase relatively more than permanent contracts.
    Keywords: Labor tax evasion, temporary contracts, firing costs, search frictions, policy evaluation
    JEL: J38 J63 J64 H26
    Date: 2013–06
  5. By: Chaton, Corinne; Durand-Viel, Laure
    Abstract: Real assets are usually valued by computing the stream of profits they can bring to a price-taking firm in a liquid market. This method ignores market fundamentals by assuming that all the relevant information is included in the spot price. Our article analyses the bias resulting from such an approach when the market is imperfectly competitive. We propose a stylised two-period model of the natural gas market with no uncertainty, focusing on strategic interactions between two types of oligopolistic players—pure traders and suppliers with downstream customers—who have access to storage. We show that the true value of storage capacity is not the same for traders and for suppliers. Comparing the latter value with the traditional price-taking valuation reveals a systematic bias that tends to induce underinvestment.
    Keywords: Assets (accounting); profit; gas industry; spot prices; suppliers; natural gas;
    JEL: L16 G14 G12
    Date: 2013

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