nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2015‒01‒14
seven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Tax planning of R&D intensive multinationals By Heckemeyer, Jost H.; Richter, Katharina; Spengel, Christoph
  2. Why accounting matters: a central bank perspective By Schwarz, Claudia; Karakitsos, Polychronis; Merriman, Niall; Studener, Werner
  3. Self-Regulatory Organizations under the Shadow of Governmental Oversight: An Experimental Investigation By Silvester Van Koten; Andreas Ortmann
  4. Opportunistic Disclosure in the Inter-Organizational Relationships By Oll, Grete
  5. Current account "core-periphery dualism" in the EMU By Tatiana Cesaroni; Roberta De Santis
  6. Sources of Labor Productivity Growth in the EU and the US: the Role of Intangible and ICT Capital By Massimiliano Iommi
  7. Public account and coding system in Kenya: The trend and pattern of agricultural expenditure: By Yu, Bingxin; Zhang, Haisen

  1. By: Heckemeyer, Jost H.; Richter, Katharina; Spengel, Christoph
    Abstract: The allocation of management and control in the business decision process finds expression in the coordination intensity between agents in the firm. We develop and test a theory, based on the organizational design literature, for the intensity in which the tax department strives to coordinate with managers from other business units in order to intervene in investment decisions. Our theoretical considerations predict that R&D intensity is an important determinant of the tax department's role. Using data from a confidential survey taken in 2012 of top financial and tax managers of very large multinational companies, representing 8% of business R&D spending in the OECD, we indeed find supporting evidence that in R&D intensive multinational firms the tax department operates more as a controller than as a manager. In particular, tax departments of R&D intensive firms make less tax planning effort, are less ambitious to minimize the tax burden of the firm, are later involved in the decision-making process of a new investment project, but are more likely to have a veto right in the decision on a new investment project as compared to less R&D intensive firms. Conditional on R&D intensity, however, the level of intangible assets in the firm is associated with more tax planning efforts and ambitions. Our results are statistically significant and robust towards several sensitivity checks.
    Keywords: corporate taxation,organizational design,survey data
    JEL: H25 L22 M41
    Date: 2014
  2. By: Schwarz, Claudia; Karakitsos, Polychronis; Merriman, Niall; Studener, Werner
    Abstract: This paper analyses how accounting frameworks can affect three important areas of responsibility of many central banks, namely monetary policy, financial stability and banking supervision. The identified effects of accounting rules and accounting information on the activities of a central bank are manifold. First, the effectiveness of monetary policy crucially hinges on the financial independence of a central bank, which can be evidenced, inter alia, by its financial strength. Using a new simulation of the financial results of the European Central Bank (ECB), this paper shows that the reported annual profit and financial buffers of a central bank can be significantly affected by accounting, profit distribution and loss coverage rules. Second, in respect of financial stability, the accounting frameworks applied by commercial banks can not only affect their behaviour, but also that of financial markets. Indeed, there is evidence that accounting frameworks amplified pro-cyclicality during the recent crisis, and thus posed risks to the stability of the financial system. This being so, the accounting frameworks of credit institutions have obvious implications for central banks’ analyses with regard to promoting financial stability. Finally, as regards banking supervision, regulatory reporting and key supervisory ratios are based on accounting data. Under the new regulatory framework for banks in the European Union (EU), bank supervisors are highly reliant on accounting data. This means that central banks, in their role as bank supervisors, need to understand the underlying accounting rules and should directly support the development and application of high-quality accounting frameworks. JEL Classification: E23, E25
    Keywords: accounting standards, banking supervision, central bank balance sheet, financial reporting, financial stability
    Date: 2014–05
  3. By: Silvester Van Koten; Andreas Ortmann
    Abstract: Self-regulatory organizations (SROs) can be found in education, healthcare, and other not-for-profit sectors as well as in the accounting, financial, and legal professions. DeMarzo et al. (2005) show theoretically that SROs can create monopoly market power for their affiliated agents, but that governmental oversight, even if less efficient than oversight by the SRO, can largely offset the market power. We provide an experimental test of this conjecture. For carefully rationalized parameterizations and implementation details, we find that the predictions of DeMarzo et al. (2005) are borne out.
    Keywords: Experimental Economics, Self-regulatory organizations, Governmental oversight
    JEL: C90 L44 G18 G28
    Date: 2014–11
  4. By: Oll, Grete (Department of Business and Economics)
    Abstract: The purpose of this paper is to explore the effect the accounting system choice has, when the supplier discloses accounting information opportunistically in an Inter-Organizational Relationship. A contract governs the trade and specifies: (i) a cost reimbursement and (ii) a profit sharing arrangement. The supplier’s opportunism emerges as he can manages the rate that is used for allocating overhead costs to the reimbursed product. Two methods of allocation rate management are available, leading to two distinct inefficiencies. First, the supplier can use some input factors in excess (Real Cost Management). Second, the supplier can influence the trade quantity (Real Activity Management). We find that even with opportunistic disclosure, the total profit of the relationship exceeds the profit under the arm’s-length relationship. With a traditional accounting system, the supplier engages in Real Cost Management if the total overhead cost is high compared to the total direct labour cost. With an Activity-Based Accounting system, the supplier engages in Real Cost Management when the overhead cost of the traded product is small compared to the overhead cost of other products. We further show that the supplier engage in Real Activity Management regardless of the accounting system. However, the size and the direction of the quantity distortion depends on the accounting system.
    Keywords: Management accounting and control; inter-organizational relationships; cost reimbursement; profit-sharing; accounting system choice; private disclosure
    JEL: M41
    Date: 2014–12–17
  5. By: Tatiana Cesaroni (Bank of Italy); Roberta De Santis (ISTAT)
    Abstract: Current account (CA) dispersion within European Union (EU) member states has been increasing progressively since the 1990s. Interestingly, the persistent deficits in many peripheral countries have not been accompanied by a significant growth process able to stimulate a log run rebalancing as neoclassical theory predicts. To shed light on the issue this paper investigates the determinants of Eurozone CA imbalances, focusing on the role played by financial integration. The analysis considers two samples of 22 OECD and 15 EU countries, three time horizons corresponding to various steps in European integration, different control variables and several panel econometric methods. The results suggest that within the OECD and EU groups financial integration contributed to explain CA deterioration in the peripheral countries especially in the post-EMU period. The business cycle seems to have played a growing role over time, whereas the role of competiveness seems to have diminished with respect to the past.
    Keywords: current account imbalances, financial integration, EMU, core-periphery countries, panel econometric models
    JEL: F36 F43
    Date: 2014–11
  6. By: Massimiliano Iommi (ISTAT)
    Abstract: This paper provides a growth accounting analysis of the sources of labor productivity growth in the business sector of 13 EU Member States and the US in the years 1995-2009. The aim of the analysis is to provide new evidence on the role of intangible and ICT capital as drivers of economic growth. We adopt the approach first proposed by Corrado, Hulten and Sichel and we extend the standard growth accounting model treating a broad range of firm expenditures for intangibles as investments that create future value. Our main results are the following: Capitalizing intangibles increases labor productivity growth in the period 1995-2009 with respect to labor productivity growth estimated from current national accounts data; Capital deepening was the dominant source of growth in 11 out of the 14 countries included in the analysis and in the other three its contribution was very close to the contribution of multi factor productivity growth; The contribution of ICT capital and Intangible non-ICT capital to labor productivity growth was quite high in all countries that performed relatively well in terms of labor productivity growth; When focusing on the US and the EU15 countries, there is a positive relationship between the growth of ICT and Intangible non-ICT capital deepening and the growth of multifactor productivity.
    Keywords: Productivity growth, Intangibles, ICT
    JEL: O47 E22 E01
    Date: 2014
  7. By: Yu, Bingxin; Zhang, Haisen
    Abstract: This paper is part of a set of country case studies that take a detailed look at public expenditures in agriculture and at how these expenditure data are captured in government financial and budget accounts. The objective of these studies is to unpack the black box of public expenditure statistics reported in various cross-country datasets and ultimately enable the use of existing government accounts to identify levels and compositions of country-level agricultural spending data, with clearer knowledge of what these data are in fact accounting for.
    Keywords: Agriculture, public expenditure, Agricultural policies, Agricultural research, Economic development, Agricultural development, classification of functions of government COFOG,
    Date: 2014

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