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on Accounting and Auditing |
| By: | Konchitchki, Yaniv |
| Abstract: | This study sheds new light on the cross-sectional effects of inflation, which have substantial implications for stock valuation. I use financial statement analysis to examine systematic stock-valuation effects of aggregate price-level changes on individual companies, focusing on the implications for both researchers and investment practitioners. I develop inflation-adjustment procedures that are straightforward for investors to implement in real time for extracting the inflation effect on individual companies. I find that inflation-based investment strategies conditioned on information available to investors as of the initial investment and rebalancing dates result in significant risk-adjusted returns. I also investigate the sources of abnormal returns to inflation-based investment strategies. Specifically, I estimate two separate components of the inflation effect on individual companies, one based on only monetary holdings (using the net position of monetary holdings) and the other based on only nonmonetary holdings. Investigating the stock-valuation implications of extracting the components-based inflation effect reveals striking evidence. In particular, investing based on the inflation effect on companies’ net monetary holdings results in insignificant abnormal hedge returns. In contrast, investing based on the inflation effect on companies’ nonmonetary holdings consistently yields economically and statistically significant abnormal hedge returns. These findings indicate that inflation-based abnormal hedge returns are driven not by the exposure of companies’ net monetary holdings to inflation but, rather, by the exposure of their nonmonetary holdings to inflation. These results are consistent with the fact that companies’ nonmonetary holdings are usually held for several years and thus accumulate inflationary effects over time whereas their monetary holdings are, on average, naturally hedged because the exposure of monetary assets cancels the exposure of monetary liabilities for the average company. In addition, I examine the direction of the stock returns to real-time investment strategies. |
| Keywords: | Accounting; Aggregate Price Levels; Capital Markets; Financial Statement Analysis; Forecasting; Hedge; Inflation; Investment; Macroeconomics; Returns; Stock Valuation |
| JEL: | E01 E02 E31 G23 M21 M41 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:52934&r=acc |
| By: | LAURENCE SEIDMAN (Department of Economics,University of Delaware) |
| Abstract: | This article recommends a tax reform strategy that can accomplish three objectives: (1) raise sufficient revenue to deal with long run budget challenges; (2) promote long run economic growth; (3) provide progressivity in the face of increasing inequality. The strategy for overcoming this fiscal trilemma is to retain (with modification) the personal income tax, the corporate income tax, and the payroll tax, and add two progressive consumption tax supplements: a value added tax made progressive by a refundable VAT credit on the 1040, and a progressive consumption surtax on the 1040. |
| Keywords: | Tax reform, Progressive consumption tax supplements |
| JEL: | H20 H24 H25 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:dlw:wpaper:14-04.&r=acc |
| By: | Ricardo Fenochietto; Carola Pessino |
| Abstract: | This paper presents a model to determine the tax effort and tax capacity of 113 countries and the main variables on which they depend. The results and the model allow a clear determination of which countries are near their tax capacity and which are some way from it, and therefore, could increase their tax revenue. This paper also determines central factors on which tax capacity depends: the level of development, trade, education, inflation, income distribution, corruption, and the ease of tax collection. |
| Keywords: | Taxes;Natural resources;Tax systems;Economic models;Cross country analysis;tax effort, tax frontier, tax capacity, tax revenue, stochastic tax frontier, inefficiency |
| Date: | 2013–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:13/244&r=acc |
| By: | Chu, Hsun; Lai, Ching-Chong; Cheng, Chu-Chuan |
| Abstract: | This paper develops an endogenous growth model featuring tax havens, and uses it to examine how the existence of tax havens affects the economic growth rate and social welfare in high-tax countries. We show that the presence of tax havens generates two conflicting channels in determining the growth effect. First, the public investment effect states that tax havens may erode tax revenues and in turn decrease the government’s infrastructure expenditure, thereby reducing growth. Second, the tax planning effect of tax havens reduces marginal cost of capital and hence encourages capital accumulation so as to spur economic growth. The overall growth effect is ambiguous and is determined by the extent of these two effects. The welfare analysis shows that tax havens are more likely to be welfare-enhancing if the government expenditure share in production is low, or the initial income tax rate is high. Moreover, the welfare-maximizing income tax rate is lower than the growth-maximizing income tax rate if tax havens are present. |
| Keywords: | tax havens, endogenous growth, optimal income tax |
| JEL: | H21 H26 O11 O40 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:52878&r=acc |
| By: | C. BELLÉGO (Insee); V. DORTET-BERNADET (Insee) |
| Abstract: | The French cluster policy Pôles de compétitivité has been launched in 2004 to foster collaborations between firms, research institutions, and training institutions. Many firms taking part in these clusters have obtained subsidies to finance R&D collaborative projects involving other firms and research institutions. This study analyzes the effects of taking part in a Pôle de compétitivité on the activity of firms. The effects are estimated by matching firms taking part in clusters to similar firms that remained out of the policy. This method only permits to estimate an effect for SME and intermediate-sized enterprises that spend less than 16 million euros in R&D per year, that are at least two years old, and that already realized R&D before taking part in a cluster. Firms participating in a Pôle de compétitivité would have increased their total R&D expenditures. Not all firms have taken part in a subsidized project, but they would have received more subsidies on average. These firms would have also benefited from higher amounts of Research tax credit (Crédit Impôt Recherche CIR) but overall we do not find any evidence of crowding out effect : public funds do not substitute private R&D. The effect seems to be additive : firms would add the amount of subsidies and tax credit to their private budget. Higher R&D spending is realized through an increase in investment and employment devoted to R&D. By cons, there is no significant short-term effect on the turnover and the number of patents. While cluster participation seems to increase R&D spending, it has not been possible to precisely disentangle the role played by the clusters and the role played by CIR, which has strongly reduced the cost of R&D at the end of the period of interest. |
| Keywords: | R&D, cluster policy, public policy evaluation, matching |
| JEL: | O38 O31 H25 C23 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpdeee:g2013-06&r=acc |
| By: | Sean Higgins (Department of Economics, Tulane University); Nora Lustig (Department of Economics, Tulane University); Whitney Ruble (Department of Economics, Tulane University); Timothy Smeeding (Institute for Research on Poverty, Robert M. La Follette School of Public Affairs, University of Wisconsin-Madison) |
| Abstract: | We perform the first comprehensive fiscal incidence analyses in Brazil and the US, including direct cash and food transfers, targeted housing and heating subsidies, public spending on education and health, and personal income, payroll, corporate income, property, and expenditure taxes. In both countries, primary spending is close to 40 percent of GDP. The US achieves higher redistribution through direct taxes and transfers, primarily due to underutilization of the personal income tax in Brazil and the fact that Brazil’s highly progressive cash and food transfer programs are small while larger transfer programs are less progressive. However, when health and non-tertiary education spending are added to income using the government cost approach, the two countries achieve similar levels of redistribution. This result may be a reflection of better-off households in Brazil opting out of public services due to quality concerns rather than a result of government effort to make spending more equitable. |
| Keywords: | inequality, fiscal policy, taxation, social spending |
| JEL: | D31 H22 I38 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:tul:wpaper:1317&r=acc |
| By: | Wall, Larry D. (Federal Reserve Bank of Atlanta) |
| Abstract: | The United States is now committed to using two relatively sophisticated approaches to measuring capital adequacy: Basel III and stress tests. This paper shows how stress testing could mitigate weaknesses in the way Basel III measures credit and interest rate risk, the way it measures bank capital, and the way it creates countercyclical capital buffers. However, this paper also emphasizes the extent to which stress tests add value will depend upon the exercise of supervisor discretion in the design of stress scenarios. Whether supervisors will use this discretion more effectively than they have used other tools in the past remains to be seen. |
| Keywords: | capital adequacy; Basel capital ratios; stress test |
| JEL: | E50 G01 G21 G28 |
| Date: | 2013–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2013-15&r=acc |
| By: | Eufinger, Christian; Gill, Andrej |
| Abstract: | This paper proposes a new regulatory approach that implements capital requirements contingent on managerial compensation. We argue that excessive risk taking in the financial sector originates from the shareholder moral hazard created by government guarantees rather than from corporate governance failures within banks. The idea of the proposed regulation is to utilize the compensation scheme to drive a wedge between the interests of top management and shareholders to counteract shareholder risk-shifting incentives. The decisive advantage of this approach compared to existing regulation is that the regulator does not need to be able to properly measure the bank investment risk, which has been shown to be a difficult task during the 2008-2009 financial crisis. -- |
| Keywords: | Basel III,capital regulation,compensation,leverage,risk |
| JEL: | G21 G28 G30 G32 G38 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:9&r=acc |