nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2016‒12‒11
five papers chosen by

  1. Audit publicity and tax compliance: a quasi-natural experiment By Pietro Battiston; Denvil Duncan; Simona Gamba; Alessandro Santoro
  2. Advanced Manufacturing Activities of Top R&D investors: Geographical and Technological Patterns By Petros Gkotsis; Antonio Vezzani
  3. MPC heterogeneity and household balance sheets By Andreas Fagereng; Martin B. Holm; Gisle J. Natvik
  4. Performance Measurement and Management Promotion through Non-Financial Measures: A Management Accounting Perspective By Eisenberg, Paul
  5. Under Cover: Estimating the Existence of Profit-Shifting by MNCs in China By Xuefeng Qian; Bifei Tian; W. Robert Reed; Zirou Chen

  1. By: Pietro Battiston; Denvil Duncan; Simona Gamba; Alessandro Santoro
    Abstract: We use confidential data on Value Added Tax payments at the sector level, in two large Italian cities, to estimate the effect of audits publicity on tax compliance of local sellers. By employing a Difference-in-Differences identification strategy, we find that such publicity has a positive effect on fiscal declarations made shortly after. The results suggest that increasing awareness on future audits via the media can be an important instrument in the hands of tax authorities.
    Keywords: Tax evasion, Quasi-natural experiment, Audit publicity
    Date: 2016–07–12
  2. By: Petros Gkotsis (European Commission – JRC); Antonio Vezzani (European Commission – JRC)
    Abstract: Advanced manufacturing technologies (AMTs) and other key enabling technologies (KETs) are expected to have a major impact on productivity, efficiency, profitability and employment in major industrial sectors worldwide. Thus, development of AMTs and KETs is considered essential if the European Union is to achieve the strategic goals set out in the European Commission’s Employment, Growth and Investment priorities. Indeed, AMTs and KETs are among the top priorities identified as necessary to support the competitiveness of European industries in the context of the European flagship on industrial modernisation. This study builds upon and extends results that were obtained in the context of the Advanced Manufacturing Technologies for Competitiveness AMTEC project, in which the technological profiles of the patent portfolios of the EU Industrial R&D Investment Scoreboard companies were constructed using patent-based analysis. In particular, their technological competences were investigated and it was found that European companies invest in KETs, and in particular in AMTs, as these technologies are considered to be vital for maintaining current competitiveness. However, other countries also invest heavily in AMTs and KETs. It is therefore very important for the EU to define a strategy that aims to find a suitable position in the global value and innovation chains and that selectively augments existing capabilities. To this end, a methodology based on patent analysis was applied to assess the capacity of the world’s top R&D investors in developing AMTs. Particular emphasis was placed on complex AMT patents that also pertain to at least one of the five KETs. These patents are considered important because they represent AMT applications used for the development of KETs in general or, conversely, they represent other KET applications that can be incorporated into AMT systems. The main questions addressed by this study were (1) In which countries are the most important inventors of AMTs and applicants for AMT-related patents located? (2) Is it possible to analyse internationalisation patterns and knowledge flows between world regions and countries? and (3) Are there any special patterns and clusters between AMT-related technological fields and the five core KETs and, if so, which companies are responsible for the development of these technological applications? Developing and patenting AMT-related technologies is particularly important for firms in the Aerospace & defence, Industrials, Automobiles & parts and Electronics & electrical equipment sectors. Moreover, the more specialised a sector is in developing AMT-related technologies, the less internationalised the AMT-related activities of the firms in the sector appear to be. In general AMT-related R&D activities of European- and US-based firms are more internationalised than the activities of Japanese- and Asian-based companies. It was found that many Scoreboard firms based in the USA, Japan, Germany, France and the UK own and develop a large number of AMT-related patents. However, there are also many inventors of AMT-related technologies based in other countries, such as China, India, Canada, Italy, Belgium and Spain. Finally, the ratio of complex AMT patents to the total number of AMT-related patents is close to 8%, the vast majority being patents that relate to micro- and nano-electronics, advanced materials or photonics. Companies that own these complex patents are often relatively small firms that are highly specialised in the development of AMT-related applications.
    Keywords: Advanced Manufacturing Technologies, Key Enabling Technologies, Patents, Industry
    Date: 2016–11
  3. By: Andreas Fagereng; Martin B. Holm; Gisle J. Natvik (Statistics Norway)
    Abstract: Using Norwegian administrative data, we study how sizable lottery prizes affect household expenditure and savings. Expenditure responses (MPCs) spike in the year of winning, with a mean estimate of 0.35, and thereafter fall markedly. Controlling for all items on the household balance sheet and characteristics such as education and age, MPCs vary with the amount won and liquid assets only. Shock size matters: The MPC among the 25 percent winning least is twice as high as among the 25 percent winning most. Many households are wealthy, illiquid and have high MPCs, consistent with 2-asset models of consumer choice.
    Keywords: marginal propensity to consume; household expenditure response; household heterogeneity; income shocks
    JEL: D12 D14 D91 E21
    Date: 2016–11
  4. By: Eisenberg, Paul
    Abstract: The purpose of this paper is the discussion of non-financial performance measures that can be adopted in the management accounting function of business organisations. The study is important because it shows how organisational focus on non-financial measures can substantially enhance profitability, albeit being subject to cost constraints. To begin with, the evolution of management accounting research over the last three decades is resented. The development in the academia is then contrasted with the management accounting techniques used in practice. Among different techniques available, the Budgeting technique and the Activity Based Costing (ABC) technique are assessed from the view-point of decision making and non-financial measures. The focus of the argument is on the suitability of non-financial measures on the evaluation of profitability through customer relationships. Enterprise Resource Planning (ERP) and the Balanced Scorecard (BSc) are identified and evaluated as instruments to include non-financial measures. Furthermore, the application of non-financial measures taken into consideration in management performance evaluation and management promoting decisions is discussed. Managerial focus on promoting measures can be promotion driven and thus short-term oriented. This threat should be kept in mind when implementing non-financial measures in management accounting systems.
    Keywords: Budgeting, Activity Based Costing (ABC), Enterprise Resource Planning (ERP), Balanced Scorecard (BSc), Performance Measurement, Customer Relationships, Management Promotion
    JEL: M10 M12 M41 M51
    Date: 2016–07–01
  5. By: Xuefeng Qian; Bifei Tian; W. Robert Reed (University of Canterbury); Zirou Chen
    Abstract: This paper investigates profit-shifting behaviour among a large sample of multinational corporations (MNCs) in China. While profit-shifting behaviour is difficult to observe directly, it can be inferred from the behaviour of firms. That is the approach taken by Egger, Merlo, & Wamser (2014, henceforth EM&W) in their seminal analysis of tax elasticity of German MNCs. They developed a two-component mixture model that categorized MNCs into tax “avoiders” and “non-avoiders” based upon the estimated elasticities of investment to taxes. We apply their approach to our sample of MNCs in China. Like EM&W we find evidence of two distinct groups of MNCs. One group is responsive to changes in taxes, reducing investment when taxes increase. The other group is unresponsive to taxes, so that investment is not significantly associated with changes in tax rates. We show that the characteristics of these groups closely match the “avoiders” and “non-avoiders” of EM&W’s sample. Even so, our estimated tax elasticities are much smaller than EM&W. This suggests that the extent of profit-shifting was relatively small during China’s period of preferential tax treatment for foreign investors.
    Keywords: Multinational Corporations (MNCs); Profit shifting; Tax elasticity of investment; Finite mixture model
    JEL: C33 F23 H32
    Date: 2016–12–05

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.