nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2016‒04‒30
six papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Regulation and Firm Value: Curious Case of Transparency and Disclosure Laws in Russia By Banerjee, Suman; Masulis, Ronald; Pal, Sarmistha
  2. What to Expect When China Liberalizes Its Capital Account By Mark Kruger; Gurnain Pasricha
  3. Property Tax and Property Values: Evidence from the 2012 Italian Tax Reform By Tommaso Oliviero; Annalisa Scognamiglio
  4. Using QuickBooks® Accounting Software to Improve Financial and Production Records for Better Decision Making By Jones, DeDe; Jones, Michelle
  5. Taxing Consumption in Canada: Rates, Revenues, and Redistribution By Richard Bird; Michael Smart; Jorge Martinez-Vazquez
  6. Official climate-related development finance in Belgium: Concepts and methodologies. By Kris Bachus

  1. By: Banerjee, Suman (University of Wyoming); Masulis, Ronald (University of New South Wales); Pal, Sarmistha (University of Surrey)
    Abstract: We provide novel evidence on the effectiveness of mandated changes in Russian transparency and disclosure (henceforth T&D) rules in boosting shareholder welfare. We focus on the staggered implementation of these T&D reforms initiated in 2002 and implemented during 2003-07. Using difference in difference method, we find that the reforms improved earnings quality, which on average reduced the operating performance (i.e., EBIT/Assets) of treated domestically-listed (relative to our control group of cross-listed) Russian firms, but had no significant impact on their market valuation. We argue that low tax alignment, where financial statements are not used for tax purposes, made it possible for managers of domestically-listed firms to inflate pre-reforms earnings, which became difficult post-reforms, leading to a drop in operating earnings. Yet, firm values, on average, remained unchanged because the drop in earnings was roughly offset by a decrease in the required market return due to more reliable accounting information post reform. Also, T&D reforms had negligible effects on cross-listed firms that act as our control group. Further, for domestically listed firms without a domestic controlling shareholder, post-reform reported earnings did not drop, while firm value increased significantly. For the domestically listed firms with a controlling shareholder, just the opposite occurred. Thus, a key finding of our study is that a strong governance structure is a prerequisite for significant gains in shareholder wealth following improved reliability of firm accounting information.
    Keywords: transparency and disclosure rules, quasi-experimental analysis, domestic vs. cross-listed firms, firm performance, Tobin's Q, EBIT-to-Asset ratio, difference-in-difference method, Russia
    JEL: G3 K2 P2
    Date: 2016–04
  2. By: Mark Kruger; Gurnain Pasricha
    Abstract: When China joined the World Trade Organization in December 2001, it marked a watershed for the world economy. Ten years from now, the opening of China’s capital account and the financial integration that will unfold will be viewed as a milestone of similar importance. This paper discusses the benefits, to China and the rest of the world, of deepening China’s capital account liberalization. We assess China’s current level of de jure and de facto integration, in relation to other G20 economies. We update the Pasricha et al. (2015) data on capital control actions to 2015 for China, to assess China’s international financial integration. We also look at its relative international investment position to gauge its de facto integration. We then estimate the size and composition of capital flows likely to ensue assuming that China’s further capital account liberalization results in its gross international investment position converging to that of the G20 average. In addition, we discuss the risks involved with the further opening of China’s capital account and how they can best be managed. We also emphasize the potentially stabilizing effects of residents’ flows and the importance of liberalizing inflows and outflows in a balanced way and at the same time.
    Keywords: Balance of payments and components, Exchange rate regimes, International topics
    JEL: F31 F32 G18
    Date: 2016
  3. By: Tommaso Oliviero (CSEF, Università di Napoli Federico II); Annalisa Scognamiglio (CSEF, Università di Napoli)
    Abstract: This paper estimates the impact of property taxes on property values. The unexpected introduction of a new fiscal regime on property taxes in 2012 adopted by the Italian government in December 2011 within the austerity plan to face the sovereign debt crisis ("Manovra Salva Italia") provides an ideal empirical setting. We exploit the cross-sectional variation in the tax rates set by each Italian municipality as the intensity of the treatment. We address the endogeneity problem by instrumenting the tax rate on primary residences with the timing of the elections. As showed by Alesina and Paradisi (2014) municipalities that did not have elections in 2013 set a tax rate about 0.1 percentage points higher than the others. Our results show that in those municipalities there has been a reduction in average property values about 6% higher the others. The effect is attributable to the relative higher property tax rate and provide evidence in favor of the capitalization hypothesis on property values.
    Keywords: Immovable property tax, Property values.
    JEL: H22 H31 R21
    Date: 2016–04–16
  4. By: Jones, DeDe; Jones, Michelle
    Abstract: Increased price volatility and narrow profit margins in production agriculture underscore the importance of sound record keeping practices. With the ever-changing environment of financial software technology, there is a growing need to educate Texas farmers and ranchers on computerized bookkeeping applications. To equip producers with stronger record-keeping skills, Texas A&M AgriLife Extension Economists developed a two-day short course that teaches basic level QuickBooks® accounting software. The main goal of these workshops is to improve financial record-keeping and analysis capabilities, allowing producers to make more informed management decisions.
    Keywords: Farm Financial Accounting, QuickBooks®, Texas A&M AgriLife Extension, Texas Panhandle, Texas High Plains, Agricultural Finance, Farm Management,
    Date: 2016
  5. By: Richard Bird (University of Toronto, Department of Economics); Michael Smart (University of Toronto, Department of Economics); Jorge Martinez-Vazquez
    Abstract: The introduction of the VAT in Canada, initially in the form of the federal GST in 1991, did not signify a major change in the tax mix even after most provincial sales taxes also became VATs. Canadians do not pay much if any more in taxes on their consumption than they did 25 years ago. Although the GST and its provincial companions are not perfect, the evidence is that they create fewer barriers to investment and growth than the taxes they replaced so that Canadians appear as a whole to be better off than they were before setting off down the road to VAT. Nonetheless, perhaps in part because the VAT in Canada unlike in other countries is generally quoted separately (like retail sales taxes in the US) and hence highly visible, it continues to be politically unpopular and considered undesirably regressive. The major contribution of this paper is to examine in some detail and with some new evidence the incidence of Canada’s sales and excise taxes, a question that has received surprisingly little analysis. Because the share of total consumption taxes coming from sales rather than excise taxes has increased, these taxes are now less regressive than they were before the move to VAT, regardless of how incidence is measured. More importantly, there are solid arguments for using consumption than income as a basis for evaluating the progressivity of consumption taxes, and on this measure the GST and its companion taxes appear to be mildly progressive. However because the remaining excises are quite regressive even on this basis, on the whole the sales and excise system remains mildly regressive.
    Keywords: sales tax, excise tax, value-added tax, incidence, progressivity
    Date: 2016–03
  6. By: Kris Bachus (HIVA, KU Leuven)
    Abstract: This research paper presents a conceptual framework to analyze the reporting and mapping of climate finance. In particular, the paper discusses the most relevant concepts and definitions with respect to climate-related development finance. It presents a comprehensive overview of the most important methodologies used to report and map climate finance and discusses the strengths and weaknesses of each methodology. In a second paper (due in 2016), we will use this conceptual framework to draw up a comprehensive overview of the current reporting on official climate-related development finance in Belgium, distinguishing between the different levels of governance. Based on this mapping exercise, we will then identify potential gaps in the reporting of official climate-related development finance in Belgium.
    Keywords: climate finance, climate flows, climate-related development finance, climate change, UNFCCC
    JEL: F35
    Date: 2015–04

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