nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2014‒12‒29
thirteen papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Taxation, Profit Distribution and Investment of Non-listed Companies in Finland By Määttänen, Niku; Ropponen, Olli
  2. The tax-rate elasticity of local business profits By Fossen, Frank M.; Steiner, Viktor
  3. International tax leadership among asymmetric countries By HINDRIKS, Jean; nishimura, YUKIHIRO; ,
  4. Reconsidering Corporate Ratings. By Bertrand K Hassani; Xin Zhao
  5. The "Triple Depreciation Line" instead of the "Triple Bottom Line": Towards a genuine integrated reporting By Rambaud, Alexandre; Richard, Jacques
  6. Sexism, Statements, and Audits By Eric Schniter; Timothy W. Shields
  7. Banking reform, risk-taking, and earnings quality – Evidence from transition countries By Fang , Yiwei; Hasan, Iftekhar; Li , Lingxiang
  8. INTERNAL CALCULATION IN TERM BUSINESS DECISION MAKING By Jugoslav Aničić, Miloje Jelić, Jasmina M. Đurović, Srećko Radoičić, Živojin B. Prokopović
  9. The joint services of money and credit By Barnett, William A.
  10. Dealer Networks By Li, Dan; Schürhoff, Norman
  11. Merchanting and Current Account Balances By Beusch, Elisabeth; Döbeli, Barbara; Fischer, Andreas M; Yesin, Pinar
  12. Financial Education and Access to Savings Accounts: Complements or Substitutes? Evidence from Ugandan Youth Clubs By Jamison, Julian C.; Karlan, Dean S.; Zinman, Jonathan
  13. The impact of diverging economic structure on current account imbalances in the euro area By Ehmer, Philipp

  1. By: Määttänen, Niku; Ropponen, Olli
    Abstract: This paper studies the taxation of non-listed companies and their owners in Finland. We first describe the main features of the Finnish tax system regarding the taxation of dividends from non-listed companies. We use firm-level data to illustrate how the tax incentives are reflected in firms’ profit distribution policies. We then build a dynamic investment model that features the main characteristics of the Finnish dividend taxation. In the model, entrepreneurs face a borrowing constraint and have a consumption smoothing motive. We use the model to investigate how the current dividend taxation affects the investment incentives. The results illustrate how the current dividend taxation in certain cases distorts firms’ investment decisions. Key words: Dividend taxation, non-listed companies, firm investment.
    Keywords: Dividend taxation, non-listed companies, firm investment
    JEL: D92 G35 H24
    Date: 2014–12–09
  2. By: Fossen, Frank M.; Steiner, Viktor
    Abstract: Local business profits respond to local business tax (LBT) rates that vary across municipalities. We estimate that a one percent increase in the LBT rate decreases the LBT base by 0.45 percent, based on the universe of German LBT return files, which include corporations and unincorporated businesses. However, the fiscal equalization scheme largely compensates municipalities for the loss in the LBT base when they increase the LBT rate. Our estimates suggest that using tax revenue data instead of tax return data, as commonly done in the literature, results in a significant bias of the elasticity away from zero.
    Keywords: local business tax,corporate tax,tax responsiveness,tax-rate elasticity
    JEL: H25 H71
    Date: 2014
  3. By: HINDRIKS, Jean (Université catholique de Louvain, CORE, Belgium); nishimura, YUKIHIRO (Osaka University, Graduate School of Economics, Japan); ,
    Abstract: Multinational companies can shift profit and income between branches in order to reduce the overall tax liabilities of the company. The result is a tax competition between countries. In this paper we consider the sequential choice of tax rates to illustrate the potential effects of tax leadership. We use a profit shifting model with multinational firms that operate in two countries, large and small. Governments compete by setting source-based corporate income taxes. We show that: (i) the sequential tax equilibria always Pareto dominate the simultaneous tax equilibrium. (ii) Each country prefers to follow than to lead the tax game. (iii) The tax leadership by the large country risk-dominates the tax leadership by the small country. Therefore our analysis provides a plausible explanation for the endogenous emergence of the tax leader- ship by the large countries. The results are contrasting with previous results in the literature.
    Keywords: profit shifting, tax competition, endogenous timing, second-mover advantage, risk-dominance
    JEL: C72 F23 H25 H87
    Date: 2014–08–19
  4. By: Bertrand K Hassani (Grupo Santander et Centre d'Economie de la Sorbonne); Xin Zhao (Morgan Stanley et Centre d'Economie de la Sorbonne)
    Abstract: In this paper, a new corporate ratings methodology is proposed. In this innovating approach corporate ratings are calibrated from data with different frequency in two-steps. Information of firms' credit quality from annual accounting ratios and daily credit derivative spreads yields are combined through a Bayesian approach. To test the performance of this new rating, an empirical analysis is carried out on a sample of 197 public traded international corporations with credit ratings from the big-three credit rating agencies. The ratings generated from the presented approach perform better than the ratings from the external agencies as it is more representative of companies' credit quality over time, therefore this approach is a suitable alternative to internal rating methods.
    Keywords: Corporate Rating, market implied rating, corporate Bond Yields.
    JEL: C23 E44 G15
    Date: 2014–10
  5. By: Rambaud, Alexandre; Richard, Jacques
    Abstract: The "Triple Bottom Line" (TBL) is a major and increasingly used socio-environmental accounting framework. However academic critical examinations of this model have remained scarce and most importantly, no real alternatives have been developed. Thus this theoretical paper provides a contribution to fill this gap. Firstly from a critical analysis of the TBL approach, we argue that this one suffers severe limitations. In particular, it does not protect human and natural capitals. As an answer to these problems, we propose and discuss an other accounting framework, the "Triple Depreciation Line" (TDL), which extends the powerful tool of capitalist accounting for preserving the financial capital, the Historical Cost Accounting and its planned depreciation, to human and natural capitals. To this end, we analyse and redefine the concept of capital in an ecological accounting context. We clearly specify the hypothesis on which the TDL relies, to facilitate comparisons and dialogues with other accounting models.
    Keywords: Capital; Depreciation; Historical Cost Accounting; Sustainable Development; Triple Bottom Line;
    JEL: M14 M41 Q56
    Date: 2014–06
  6. By: Eric Schniter (The Economic Science Institute, and Argyros School of Business & Economics, Chapman University); Timothy W. Shields (The Economic Science Institute, and Argyros School of Business & Economics, Chapman University)
    Abstract: Gender stereotypes and gender-discriminant behaviors have been shown to have strong and undesirable organizational, managerial, and economic effects. We examine the relationship between sexism and accounting practices, and the effect of contextual feedback using laboratory experiments. Sexist stereotypes and contextual feedback may affect the likelihood of financial misstatements and audits when auditors and issuers are of known gender. To investigate these aspects of sexism at zero acquaintance and after contextual feedback, we presented males and females with incentivized belief elicitation tasks about anticipated interaction behaviors and then a series of strategic-communication game decisions in same, other, and unknown gender interactions. Feedback about belief accuracy, actual behaviors, and earnings was only given after completing a full set of belief elicitations and interactions. At zero acquaintance, both genders stereotyped the other gender’s behavior propensities as relatively different than their own gender’s. Both genders’ stereotyped male and female targets similarly, and while both genders discriminated based on target gender, males’ and females’ behavior was similar. Consistent with a statistical discrimination account of sexism, stereotypes and game behaviors were adjusted after contextual feedback to more accurately reflect and predict others’ behaviors. While biosocial and evolutionary perspectives may help explain why undesirable sexism is prevalent, our results suggest that by providing contextual information and incentives in reporting and auditing settings, we can motivate sexists to moderate their stereotypes and linked behaviors.
    Keywords: sexism, gender, stereotype, discrimination, audit
    JEL: A13 D03 J14 Z1
    Date: 2014
  7. By: Fang , Yiwei (BOFIT); Hasan, Iftekhar (BOFIT); Li , Lingxiang (BOFIT)
    Abstract: The dynamic banking reforms of Central and Eastern Europe (CEE) following the collapse of the Soviet Union provide an ideal research setting for examining the causal effect of institutional development on financial reporting. Using five earnings quality measures, we consistently find that banking reform improves accounting quality and reduces earnings management incentives in the 16 transition countries considered. The results strongly hold in our within-country and difference-in-difference models, as well as in non-parametric analyses. We also find supporting evidence for the notion that excessive risk-taking of banks impairs earnings quality. As a result, banking reform improves earnings quality partially through its ability to curb risk-taking behavior.
    Keywords: earnings management; earnings quality; institutional development; bank risk-taking
    JEL: E50 G15 G18 G38 M41 M48
    Date: 2014–12–02
  8. By: Jugoslav Aničić, Miloje Jelić, Jasmina M. Đurović, Srećko Radoičić, Živojin B. Prokopović (University Union Nikola Tesla, Faculty of Construction Management)
    Abstract: Business-financial decision making represent prime activity of top management. Growing complexity in the business ,market and rapid technological change require fast and appropriate answer of top management. Confident and efficient system of internal calculation gives confident base, for making financial decision and strategic as well. Companies of industrial sector in Serbia can significantly improve their business performance by improving internal calculation systems. The preservation and strengthening market position of a company can only be achieved by continuous cost control, based on reliable accounting, and adequate system of internal calculation.
    Keywords: internal calculation, business decisions, management, competitiveness
    JEL: M41
    Date: 2014–04
  9. By: Barnett, William A.
    Abstract: While credit cards provide transaction services, as do currency and demand deposits, credit cards have never been included in measures of the money supply. The reason is accounting conventions, which do not permit adding liabilities, such as credit card balances, to assets, such as money. But economic aggregation theory and index number theory are based on microeconomic theory, not accounting, and measure service flows. We derive theory needed to measure the joint services of credit cards and money. In the transmission mechanism of central bank policy, these results raise potentially fundamental questions about the traditional dichotomy between money and some forms of short term credit, such as checkable lines of credit. We do not explore those deeper issues in this paper, which focuses on measurement.
    Keywords: credit cards, money, credit, aggregation theory, index number theory, Divisia index, risk, asset pricing.
    JEL: C43 E01 E3 E40 E41 E51 E52 E58
    Date: 2014–12–01
  10. By: Li, Dan; Schürhoff, Norman
    Abstract: Dealers in over-the-counter securities form networks to mitigate search frictions. The audit trail for municipal bonds shows the dealer network has a core-periphery structure. Central dealers are more efficient at matching buyers and sellers than peripheral dealers, which shortens intermediation chains and speeds up trading. Investors face a tradeoff between execution speed and cost. Central dealers provide immediacy by pre-arranging fewer trades and holding larger inventory. However, trading costs increase strongly with dealer centrality. Investors with strong liquidity need trade with central dealers and at times of market-wide illiquidity. Central dealers thus serve as liquidity providers of last resort.
    Keywords: decentralization; immediacy; liquidity; market quality; municipal bonds; network analysis; over-the-counter financial market; trading cost; transparency
    JEL: G12 G14 G24
    Date: 2014–11
  11. By: Beusch, Elisabeth; Döbeli, Barbara; Fischer, Andreas M; Yesin, Pinar
    Abstract: Merchanting is goods trade that does not cross the border of the firm's country of residence. Merchanting grew strongly in the last decade in several European economies and has become an important determinant of these countries' current account. Because merchanting firms reinvest their earnings abroad to expand their international activities, this practice raises national savings in the home country without increasing domestic investment. This results in a larger current account surplus. To show the empirical links between merchanting and the current account balance, two exercises are performed in this paper using a sample of 53 countries during 1980-2011. The first exercise estimates the savings impact of merchanting countries in empirical models of the medium-term current account. The second exercise shows that merchanting's impact on the country's current account is sensitive to firm mobility.
    Keywords: current account adjustment; industry dynamics; Merchanting
    JEL: F10 F20 F32
    Date: 2014–05
  12. By: Jamison, Julian C.; Karlan, Dean S.; Zinman, Jonathan
    Abstract: Evidence on the effectiveness of financial education and formal savings account access is lacking, particularly for youth. We randomly assign 250 youth clubs to receive either financial education, access to a cheap group account, or both. The financial education treatments increase financial literacy; the account-only treatment does not. Administrative data shows the education plus account treatment increases bank savings relative to account-only. But survey-measured total savings shows roughly equal increases across all treatment arms. Earned income also increases in all treatment arms. We find little evidence that education and account access are strong complements, and some evidence they are substitutes.
    Keywords: financial access; financial education; financial literacy; microsaving; savings; youth savings
    JEL: D12 D91 O12
    Date: 2014–05
  13. By: Ehmer, Philipp
    Abstract: The measures implemented to reduce current account deficits within several euro area econ-omies are aimed at boosting competitiveness to raise exports. Due to low industrial capacities in Greece, Portugal and Spain, for instance, it is questionable, however, whether exports can contribute much to the required turnaround of the current account. The existing literature on current account determinants ignores the impact of economic structure. However, as industrial goods are more tradable than services, a specialisation on manufacturing industries should ceteris paribus lead to an improved current account. The empirical analysis of this paper con-firms a significant impact of the sectoral focus on the current account within the euro area. Hence, the turnaround in crisis-hit economies has to be accomplished mostly through imports. As can be observed, this brings about severe recessions - more severe than in manufacturing-based economies which use the exports channel to a larger extent. Within a currency union where there is no depreciation which facilitates the adjustment economies should aim at har-monising their economic structure regarding export capacity.
    Keywords: euro area,current account imbalances,current account determinants,savings rate, economic structure,sectoral focus,optimum currency area
    JEL: E21 F32 F41 L16 O14
    Date: 2014

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