nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2014‒03‒01
six papers chosen by
Alexander Harin
Modern University for the Humanities

  1. A 150-year Perspective on Swedish Capital Income Taxation By Du Rietz, Gunnar; Johansson, Dan; Stenkula, Mikael
  2. IFRS Standards and Insurance Companies: What Stakes for Long-Term Investment? A French Case Explanatory Analysis By Samira Demaria; Sandra Rigot
  3. Market vs. Residence Principle: Experimental Evidence on the Effects of a Financial Transaction Tax By Huber, Jürgen; Kirchler, Michael; Kleinlercher, Daniel; Sutter, Matthias
  4. Performance Effects of Appointing Other Firms' Executive Directors to Corporate Boards: An Analysis of UK Firms By Muravyev, Alexander; Talavera, Oleksandr; Weir, Charlie
  5. Strategies on initial public offering of company equity at stock exchanges in imperfect highly volatile global capital markets with induced nonlinearities By Ledenyov, Dimitri O.; Ledenyov, Viktor O.
  6. Social Esteem versus Social Stigma: the role of anonymity in an income reporting game. By Sandro Casal; Luigi Mittone

  1. By: Du Rietz, Gunnar (Research Institute of Industrial Economics (IFN)); Johansson, Dan (Örebro University School of Business); Stenkula, Mikael (Research Institute of Industrial Economics (IFN))
    Abstract: This paper describes the evolution of capital income taxation, including corporate, dividend, interest, capital gains and wealth taxation, in Sweden between 1862 and 2010. To illustrate the evolution, we present annual time-series data on the marginal effective tax rates on capital income (METR) for a marginal investment financed with new share issues, retained earnings or debt. Tax tables covering the period are presented. These data are unique in their consistency, thoroughness and time span covered. The METR is low, is stable and does not exceed five percent until World War I, when it starts to drift somewhat upward and vary depending on the source of finance. The outbreak of World War II starts a period when the magnitude and variation of the METR sharply increases. The METR peaks during the 1970s and 1980s and often exceeds 100 percent. The 1990–1991 tax reform and lower inflation reduce the magnitude and variation of the METR. The METR varies between 15 and 40 percent at the end of the examined period.
    Keywords: cost of capital; marginal effective tax rates; marginal tax wedges; tax reforms
    JEL: H21 H31 N44
    Date: 2014–02–21
  2. By: Samira Demaria (GREDEG CNRS; University of Nice Sophia Antipolis); Sandra Rigot (CEPN CNRS; University of Paris North)
    Abstract: This paper investigates to what extent IFRS standards may cause incentives or constraints on long-term investment strategies of French insurance companies, based on 43 semi-structured interviews of insurance companies’ managers, regulators and professional organizations in France. Our results show that practitioners highlight some issues related to the capacity of current IFRS accounting rules to give a fair representation of their activities related to their specific profile. First, they underline an artificial mismatch between assets and liabilities measurement related to IAS 39 and IFRS 4 phase 1. Second, they point out effects on their asset allocation strategies due to the increased short-term volatility introduced by fair value measurement. After investigating solutions to recognising the long-term horizon in asset category, we discuss the necessary consistency of accounting standard for representing long-term business.
    Keywords: Insurance industry, long-term investment, IFRS accounting
    JEL: M41
    Date: 2014–02
  3. By: Huber, Jürgen (University of Innsbruck); Kirchler, Michael (University of Innsbruck); Kleinlercher, Daniel (University of Innsbruck); Sutter, Matthias (European University Institute)
    Abstract: While politically attractive in order to generate tax revenues, the effects of a financial transaction tax (FTT) are scientifically disputed, not the least because seemingly small details of its implementation may matter a lot. In this paper, we provide experimental evidence on the different effects of a FTT, depending on whether it is implemented as a tax on markets, on residents, or a combination of both. We find that the effects of a tax on markets are different from a tax on residents, with negative effects of a market tax on volatility and trading volume. The residence principle shows none of these undesired effects. In addition to studying aggregate market outcomes, we investigate how individual traders react to different forms of a FTT and whether their risk attitude is related to these reactions. We find no such relationship, meaning that a FTT affects traders with different risk tolerances similarly.
    Keywords: Financial Transaction Tax, experimental finance, residence principle, market principle
    JEL: C91 G10 E62
    Date: 2014–02
  4. By: Muravyev, Alexander (St. Petersburg University GSOM and IZA); Talavera, Oleksandr (University of Sheffield); Weir, Charlie (Robert Gordon University)
    Abstract: This paper studies the effect on company performance of appointing non-executive directors that are also executive directors in other firms. The analysis is based on a new panel dataset of UK companies over 2002-2008. Our findings suggest a positive relationship between the presence of these non-executive directors and the accounting performance of the appointing companies. The effect is stronger if these directors are executive directors in firms that are performing well. We also find a positive effect when these non-executive directors are members of the audit committee. Overall, our results are broadly consistent with the view that non-executive directors that are executives in other firms contribute to both the monitoring and advisory functions of corporate boards.
    Keywords: executive directors, non-executive directors, company performance
    JEL: G34 G39
    Date: 2014–02
  5. By: Ledenyov, Dimitri O.; Ledenyov, Viktor O.
    Abstract: This research considers the strategies on the initial public offering of company equity at the stock exchanges in the imperfect highly volatile global capital markets with the nonlinearities. We provide the IPO definition and compare the initial listing requirements on the various markets. We analyze the IPO techniques: the fixed-price offerings, auctions, book-building. We focus on the IPO initial underpricing, long-run performance and after market liquidity problems. 1. We propose that the information absorption by the investors occurs in the evolving learning process about the company’s value, taking to the consideration the fundamental purpose of investing and the responsibilities of investors. 2. We think that the information absorption capacity by the investors on the IPOs impacts the investor’s investment decisions and serves as a pre-determinant for the successful IPO deal completion. We propose the Ledenyov theory on the origins of the IPO underpricing and long term underperformance effects, which states that the IPO underpricing and long term underperformance can be explained by the changing information absorption capacity by the investors on the IPO value. 3. We think that the IPO winning virtuous investment strategies can only be selected by the investors with the highest information absorption capacity through the decision making process on the IPO investment choices at the selected stock exchange in the imperfect highly volatile global capital markets with the nonlinearities; applying the econophysical econometrical analysis with the use of the inductive, deductive and abductive logics in the frames of the strategic choice structuring process, that is the winning through the distinctive choices process.
    Keywords: Information absorption, initial public offering (IPO), listing requirements, mechanism choices, direct costs, underwriting, audit fees, selling commission, legal expenses, indirect costs, certification, grading, market cycles, valuation, underpricing, overpricing, long term under-performance, long term over-performance, investment strategy, inductive logics, deductive logics, abductive logics, strategic choice structuring process, nonlinearities, econophysics, econometrics, stock exchanges, imperfect highly volatile global capital markets.
    JEL: C16 C5 C58 C87 D81 D82 D83 G1 G11 G12 G17 G24 G32 G34 L1 L21 L22 L25 M4
    Date: 2014–02–18
  6. By: Sandro Casal; Luigi Mittone
    Abstract: When the phenomenon of tax evasion is discussed, both scholars and authorities agree on the fact that, although essential, classical enforcements are not enough to ensure tax compliance: some other forms of incentives must be adopted. The paper’s aim is to experimentally test the role of different non- monetary incentives for tax compliance: participants have been treated with different experimental conditions, which differ in the role played by anonymity. Indeed, subjects have been informed on the possibility of revealing their identity and their choices through the publication of their pictures, as a consequence of the result of the auditing process. As expected, anonymity plays an important role in the decision to pay taxes; in addition, we find that negative non-monetary incentive increases tax compliance more effectively than positive non-monetary incentive. We find also that the effect of these non-monetary incentives is mitigated, when too many information are made available. Finally, results show that, when evasion is made public, tax-dodgers are willing to pay in order to keep secret their cheating behavior and avoid public shame.
    Keywords: Tax Evasion, Non-monetary incentives, Anonymity, Experimental Economics
    Date: 2014

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