nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2015‒02‒11
nine papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The effect of taxes on corporate financing decisions: Evidence from the German interest barrier By Alberternst, Stephan; Sureth, Caren
  2. Essays in financial reporting, tax, and politics By Janssen, W.H.P.
  3. Swedish Taxation Since 1862: An Overview By Henrekson, Magnus; Stenkula, Mikael
  4. The Effect of Regulatory Harmonization on Cross-border Labor Migration: Evidence from the Accounting Profession By Matthew J. Bloomfield; Ulf Brüggemann; Hans B. Christensen; Christian Leuz
  5. (VF) Etude exploratoire de l’impact des normes IFRS sur les politiques de couverture des risques financiers. Le cas des groupes cotés en France. (VA) Exploratory study of the impact of the standards IFRS on the policies of risk coverage financial. The case of the groups listed in France. By Evelyne Poincelot, Isabelle Chambost
  6. Calculating failure: the making of a calculative infrastructure for forgiving and forecasting failure By Liisa Kurunmaki; Peter Miller
  7. Transitioning to a new Scottish state: immediate set-up costs, how the handover will work, and the long-run viability of Scottish government By Patrick Dunleavy; Sean Kippin; Joel Suss
  8. The new UK model of press regulation By Hugh Tomlinson
  9. Determinants of Worldwide Diffusion of GlobalGAP Certification By Masood, Amjad; Brümmer, Bernhard

  1. By: Alberternst, Stephan; Sureth, Caren
    Abstract: The theoretical literature suggests that when taking tax effects into account, debt ought to be preferable to equity. However, there are no uniform predictions of the size of this tax benefit (tax shield) in comparison to an opposing increasing cost of debt (especially insolvency costs). The vast body of empirical studies on the impact of taxation on capital structure only provides puzzling effects. We believe the German corporate tax reform in 2008, which introduced an interest barrier as a "quasiexperiment", is a promising opportunity to investigate the effects that arise from a reform of interest deductibility. We study capital structure adjustments empirically using financial statement data from German companies. We consider a study of German tax reform on the basis of German data of general interest because, first, similar tax reforms have been conducted in several countries. Second, the availability of single entity financial statements for German companies allow us to capture tax and capital structure details that have not been available in most prior studies. Third, the major characteristics of the German tax system can be regarded as representative for most European and the major Asian countries. All of this information enables us to contribute to solving the capital structure puzzle in a unique way. With significance at the 5% level, we find evidence that the companies that are affected by the interest barrier reduce their leverage by 3 percentage points more than companies that are not affected. We are the first to employ a detailed matching approach to the underlying rich dataset, which enables us to overcome some of the limitations of previous studies. While many prior empirical studies on capital structure have provided mixed results on capital structure reactions, we find robust evidence for the impact of tax reforms on corporations' financing decisions.
    Keywords: financing decisions,German tax reform,interest barrier,leverage, taxation,thin capitalisation rules
    JEL: H21 H24 H25 C54
    Date: 2015
  2. By: Janssen, W.H.P. (Tilburg University, School of Economics and Management)
    Abstract: This dissertation contains three essays on financial reporting, tax, and politics. The first essay explores whether the tax authority is able to generate spillover effects for auditors. The IRS can generate spillover effects for auditors, as a strong IRS increases manager’s incentives to comply with tax regulations, which causes auditors to reduce the assessment of audit risk. The main result in this essay is consistent with this prediction, as auditors demand lower audit fees in IRS districts where firms report higher GAAP effective tax rates. The second essay explores whether a firm’s commitment in providing disaggregated accounting information disciplines managers such that they provide more disaggregated forward looking disclosures. As of 1998, SFAS 131 allows US firms to withhold audited profitability accounting information on geographical segments. The results in this essay are consistent with a disciplining role for geographical segment information as the results indicate that firms that do not show commitment in continuing to provide segmented profitability accounting information reduce their disaggregated forward looking disclosures on foreign operations in the MD&A. The third essay explores whether firms use executive compensation to compensate managers for contributing their personal money to the political process. The results seem consistent with this expectation as firms that used corporate funds for contributing to politics, but were unable to do so after the adoption of the Bipartisan Campaign Reform Act (BCRA) in 2002, increased their executive cash compensation. These firms increase salaries even more when investors react very negatively to the adoption of BCRA.
    Date: 2015
  3. By: Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Stenkula, Mikael (Research Institute of Industrial Economics (IFN))
    Abstract: This paper examines the development of taxation in Sweden from 1862 to 2013. The examination covers six key aspects of the Swedish tax system: the taxation of labor income, capital income, consumption, inheritance and gift, wealth and real estate. The importance of these taxes varied greatly over time and Sweden increasingly relied on broad-based taxes (such as income taxes and general consumption taxes) and taxes that were less visible to the public (such as payroll taxes and social security contributions). The tax-to-GDP ratio was initially low and relatively stable, but from the 1930s, the ratio increased sharply for 50 years. Towards the end of the period, the tax-to-GDP ratio declined significantly. The analysis is based on a project conducted at the Research Institute of Industrial Economics (IFN) and provides both a unique length and breadth of the development of a national tax system.
    Keywords: Keywords: Income tax; Wealth tax; Inheritance and gift tax; Consumption tax; Real estate tax; Tax reforms
    JEL: H20 H71 N43 N44
    Date: 2015–01–02
  4. By: Matthew J. Bloomfield; Ulf Brüggemann; Hans B. Christensen; Christian Leuz
    Abstract: The paper examines the effect of international regulatory harmonization on cross-border labor migration. We analyze directives in the European Union (EU) that harmonized accounting and auditing standards. This regulatory harmonization should make it less costly for those who work in the accounting profession to move across countries. Our research design compares the cross-border migration of accounting professionals relative to tightly-matched other professionals before and after regulatory harmonization. We find that, on average, labor migration in the accounting profession increases relative to comparable professions by roughly 15% after harmonization. The findings illustrate that diversity in rules constitutes an important economic barrier to cross-border labor mobility and, more specifically, that accounting harmonization can have meaningful effect on cross-border migration.
    JEL: D10 E24 F22 F55 J44 J61 J62 K22 L84 M41 M42
    Date: 2015–01
  5. By: Evelyne Poincelot, Isabelle Chambost (IAE DIJON - Université de Bourgogne (CREGO))
    Abstract: (VF) Cet article a pour vocation d’analyser les relations pouvant exister entre les politiques économiques de couverture de risques financiers et leur traduction comptable, en s’interrogeant plus précisément sur les effets éventuels des modifications des règlementations comptables sur les pratiques. Il se fonde notamment sur une étude empirique exploratoire testant, à partir des états financiers, l’hypothèse d’une modification éventuelle des politiques de couverture des groupes cotés en France, suite à la modification du référentiel comptable opéré en 2005. (VA) This paper aims to examine the possible relationships between economic coverage and accounting, questioning specifically on the possible effects of changes, in accounting regulations in terms of coverage, on practices. In the first part, the perspective of the accounting for hedging risk according to IFRS and French GAAP, will question the ambivalent relationship that may exist between economic coverage practices and their accounting representations. It will lead to a second part to put and test the hypothesis of a possible change of policy coverage groups listed in France following the change in accounting standards operated in 2005.
    Keywords: IFRS, couverture, risques financiers, comptabilité, IFRS, coverage, hedging risk, accounting
    JEL: M41 G32
    Date: 2015–01
  6. By: Liisa Kurunmaki; Peter Miller
    Abstract: This paper examines how the category of failure was economised and made calculable. It explores the preconditions for this shift in three stages. First, it explores how failure came to be ‘forgiven’ in both the U.S. and the U.K. across the nineteenth century, how it came to be defined as something that is economic or financial, rather than personal or moral. Second, it explores the rapid growth of narrating and rating failure in the mid nineteenth century, with particular attention to the formation of credit rating agencies from the 1840s onwards. We consider also the roles played in this process by two fortuitous technological developments – the typewriter, and carbon paper for copying. Third, we examine the emergence of the calculative infrastructure which has helped to establish an industry of attempts to forecast failure from the beginning of the twentieth century, initially on the basis of financial ratios, and more recently through the use of risk indexes. We use the term ‘calculating failure’ to describe this transformation and economisation of both the ideas and the instruments of failure, and suggest that this has significant implications for the study of strategy.
    Keywords: accounting; bankruptcy; calculative infrastructure; calculative technologies; credit rating; economisation; failure; insolvency; marketization
    JEL: M40
    Date: 2013–10–10
  7. By: Patrick Dunleavy; Sean Kippin; Joel Suss
    Abstract: The co-Director of Democratic Audit, Professor Patrick Dunleavy was asked by the leading Scottish newspaper, the Sunday Post, to write a report on the costs of transitioning to a new government in the event of a ‘Yes’ vote in Scotland’s independence referendum. The report argues that an independent Scotland would face immediate set-up costs of up to £200 million in creating new administrative structures that duplicate UK institutions, but could also streamline many public bodies. During the transition process, Scottish government could agree contracts or service deals with London to maintain existing back office support system (mainly involving IT) in collecting taxes, paying benefits and organizing complex defence systems. In the medium term (by 2018 to 20021) Scotland would need to build its own, new IT systems to allow policy control to be fully exercised from Edinburgh, in each of these areas. These tasks would certainly cost several hundred million pounds, but they would also be investments in modern systems, and not just “set up” costs. Significant policy savings may also accrue, and offset some of this burden. A key influence on Scotland’s costs would be the conduct of negotiations between Scottish ministers and the remaining UK (rUK) government. A hostile approach by London ministers would force rapid changes and greatly add to Scotland’s costs. A more careful, phased approach would make these costs a lot less. Every transition to a new state has some uncertainty and a degree of risk. But there are no bases for extreme anxiety about an independence transition in Scotland. The Scottish government’s record in public management is a good one, its published plans for transition are relatively specific and reasonable, and the long-run viability of a Scottish state looks strong. The main current uncertainties arise from the London government’s apparent reluctance to do any planning for, or to make clear to Scottish voters, how a transition to independence would be handled at their end. The report has already been covered extensively, including in the Scotsman, the Guardian, by the BBC, the Spectator and others.
    JEL: E6
    Date: 2014–06
  8. By: Hugh Tomlinson
    Abstract: The Leveson Report on the Culture, Practices and Ethics of the Press proposed a system under which the independence and effectiveness of a self-regulator set up by the press could be assured through a process of independent “audit” or “recognition”. The Royal Charter on Self-Regulation of the Press establishes an independent Recognition Panel, which does not regulate the press, but decides whether a self-regulator meets pre-set criteria for regulatory independence and effectiveness. The Recognition Panel is independently appointed and protected from political interference by the terms of the Royal Charter and by a statutory requirement that a two-thirds majority of both Houses of Parliament is required to amend that Charter. There is a “double lock” on political interference with the recognition system. Under the system proposed by Leveson the press remains in operational control of its own regulation and politicians are excluded from any role in the process. The Recognition Panel is an auditor, not a regulator.
    JEL: L91 L96
    Date: 2014–03
  9. By: Masood, Amjad; Brümmer, Bernhard
    Abstract: GlobalGAP is an important private standard in food sector. However, geographic diffusion of GlobalGAP is uneven across the world. We use a panel from 2008 to 2012 for 170 FAO member countries to analyze GlobalGAP diffusion in the agricultural sector as a whole as well as in the crops subsector. So far, studies on standards have been mostly dealing with farm level data and very few consider the case of macroeconomic determinants of diffusion only in case of public standards. We, on the other hand, consider the case of a private standard, namely GlobalGAP and estimate the macroeconomic determinants of GlobalGAP diffusion. For estimation, a Heckman two-stage model is applied using number of GlobalGAP certified producers as well as hectares of area harvested under GlobalGAP as dependent variables. We analyze the impact of network ties and historical relations among countries, and various macroeconomic conditions prevailing in courtiers on diffusion of certification. The study finds that diffusion is positively related common language, presence of auditing facility domestically and better infrastructure. We also find that countries with higher relative size of fruits and vegetables in the agriculture sector, and with more exports of fruits and vegetables to the EU states have higher coverage of GlobalGAP.
    Keywords: Standards, Food quality, Diffusion, Organizational innovation, GlobalGAP, Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety, Industrial Organization, International Relations/Trade, Marketing, Q17, Q18, Q13, O19,
    Date: 2014–10

This nep-acc issue is ©2015 by Alexander Harin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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